Annual Report Südzucker AG 2004/05
Annual Report Südzucker AG 2004/05
Südzucker Aktiengesellschaft Mannheim/Ochsenfurt
Imprint
Corporate profile
Group Annual Report for 2004/05 Südzucker AG Mannheim/Ochsenfurt Maximilianstraße 10
1 March 2004 to 29 February 2005 The Südzucker Group
68165 Mannheim Telefon: +49 6 21 42 1-0 Telefax: +49 6 21 42 1-393
“ REFLECT AND ACT UPON THE TASKS FOR TODAY AND TOMORROW TO PROTECT THE INTERESTS AND LEGITIMATE CONCERNS OF OUR SHAREHOLDERS, CUSTOMERS, STAFF AND FUTURE GENERATIONS.”
http://www.suedzucker.de Investor Relations
[email protected]
Südzucker is an international organisation, using agricultural raw materials to produce safe and high-quality products, particularly foodstuffs for the food processing industry and consumers. In addition to the traditional sugar segment, in which Südzucker is the market leader in Europe, it has a dynamically growing special products segment, incorporating functional food (Palatinit/ORAFTI), starch, portion pack items, bakery additives, deep-frozen products (pizzas), fruit additives/fruit-juice concentrates and bioethanol. The group’s strategic objectives are to stay on a steady path of profitability whilst maintaining sound balance sheet and financial structures.
Telefon: +49 6 21 42 1-244 Telefax: +49 6 21 42 1-463 Wirtschaftspresse
[email protected] Telefon: +49 6 21 42 1-409 Telefax: +49 6 21 42 1-425
Südzucker thus concentrates on those activities in which it has a competitive advantage from its existing core competencies. The group’s significant strengths include a close connection to agriculture, knowhow in the sugar industry and innovative power supported by its internal research infrastructure. Those new business activities which have been set up in parallel with the sugar segment have an affinity to the core business, enabling business risks to be kept within reasonable limits.
Photographs: Wilhelm Dürr, Thomas Kauffelt, Hartmut Krimmer, Christel Pfau, Gerald Schilling, Südzucker
Layout and design: trio-group, Mannheim Printing and processing: Color Druck, Leimen © 2005
Using its CropEnergies brand, Südzucker started producing bioethanol and animal feed from wheat and sugar beet at a new and innovative plant in 2005. Four double-page spreads set out the benefits of Südzucker's bioethanol to investors, consumers, agriculture and the environment. We are committed to natural, sustainable growth.
Südzucker Aktiengesellschaft Mannheim/Ochsenfurt
Imprint
Corporate profile
Group Annual Report for 2004/05 Südzucker AG Mannheim/Ochsenfurt Maximilianstraße 10
1 March 2004 to 29 February 2005 The Südzucker Group
68165 Mannheim Telefon: +49 6 21 42 1-0 Telefax: +49 6 21 42 1-393
“ REFLECT AND ACT UPON THE TASKS FOR TODAY AND TOMORROW TO PROTECT THE INTERESTS AND LEGITIMATE CONCERNS OF OUR SHAREHOLDERS, CUSTOMERS, STAFF AND FUTURE GENERATIONS.”
http://www.suedzucker.de Investor Relations
[email protected]
Südzucker is an international organisation, using agricultural raw materials to produce safe and high-quality products, particularly foodstuffs for the food processing industry and consumers. In addition to the traditional sugar segment, in which Südzucker is the market leader in Europe, it has a dynamically growing special products segment, incorporating functional food (Palatinit/ORAFTI), starch, portion pack items, bakery additives, deep-frozen products (pizzas), fruit additives/fruit-juice concentrates and bioethanol. The group’s strategic objectives are to stay on a steady path of profitability whilst maintaining sound balance sheet and financial structures.
Telefon: +49 6 21 42 1-244 Telefax: +49 6 21 42 1-463 Wirtschaftspresse
[email protected] Telefon: +49 6 21 42 1-409 Telefax: +49 6 21 42 1-425
Südzucker thus concentrates on those activities in which it has a competitive advantage from its existing core competencies. The group’s significant strengths include a close connection to agriculture, knowhow in the sugar industry and innovative power supported by its internal research infrastructure. Those new business activities which have been set up in parallel with the sugar segment have an affinity to the core business, enabling business risks to be kept within reasonable limits.
Photographs: Wilhelm Dürr, Thomas Kauffelt, Hartmut Krimmer, Christel Pfau, Gerald Schilling, Südzucker
Layout and design: trio-group, Mannheim Printing and processing: Color Druck, Leimen © 2005
Using its CropEnergies brand, Südzucker started producing bioethanol and animal feed from wheat and sugar beet at a new and innovative plant in 2005. Four double-page spreads set out the benefits of Südzucker's bioethanol to investors, consumers, agriculture and the environment. We are committed to natural, sustainable growth.
Contents
Key figures (inside cover) Segment overview
8
Supervisory board and executive board
10
Agenda of the annual general meeting
12
Report of the supervisory board
15
Corporate governance
17
Südzucker share
18
Management report Foreword by the executive board
24
Group financial statements, results of operations, financial position and net assets
32
Risk report
35
Events after the balance sheet date
37
Outlook
37
Sugar segment
40
– Market developments
40
– Performance of the divisions
42
Special products segment
52
– Overview
52
– Performance of the divisions
52
Personnel
58
Research and development
59
Capital expenditures
62
Consolidated financial statements Balance sheet
66
Statement of income
67
Statement of cash flows
68
Statement of shareholders´ equity
69
Segment reporting
70
Notes to the consolidated financial statements
72
The numbers in brackets in this annual report relate to the previous year.
Help
Previous page Next page
Opens "Bookmarks". Here You can navigate by bookmarks (textlinks). Opens "Thumbnails". Here You can navigate by thumbnails.
Key figures
IFRS/IAS
IFRS/IAS
IAS
IAS
IAS
IAS
IAS
HGB
HGB
HGB
2004/05
2003/04
2002/03
2001/02
2000/01
1999/2000
1998/99
1997/98
1996/97
1995/96
17,494
17,973
14,855
23,638
28,415
29,579
25,619
20,394
19,239
19,539
Group Employees (average during the year) Total assets
D million
7,195
6,038
5,826
5,843
4,947
4,677
4,588
3,597
3,622
3,196
Non-current assets
D million
4,094
3,359
3,237
3,303
2,387
2,450
2,436
1,662
1,741
1,605
Shareholders’ equity
D million
2,738
2,386
2,221
2,010
1,703
1,619
1,553
904
1,016
867
as % of total liabilities and shareholders’ equity
%
38.1
39.5
38.1
34.4
34.4
34.6
33.8
25.1
28.1
27.1
Medium-term and long-term third-party liabilities
D million
2,163
2,039
1,813
1,928
1,598
1,502
1,523
1,123
1,094
1,097
Total shareholders’ equity, medium-term and long-term liabilities
D million
4,901
4,425
4,034
3,938
3,301
3,121
3,076
2,028
2,110
1,964
%
119.7
131.7
124.6
119.2
138.3
127.4
126.3
122.0
121.1
122,4
D million
807
1,066
797
635
914
671
640
366
369
359
D million
500
307
207
219
215
233
238
209
213
194
D million
590
181
46
1,671
37
87
209
184
209
77
Total capital expenditures
D million
1,090
488
253
1,890
252
320
447
393
422
271
Gross cash flow from operating activities
D million
550
522
580
551
498
472
464
480
437
410
%
11.4
11.4
13.2
11.5
10.7
10.5
10.3
11.5
11.3
10.7
Revenues
D million
4,827
4,575
4,384
4,776
4,664
4,517
4,504
4,187
3,885
3,826
of which foreign
D million
3.495
3,135
3,024
2,672
2,404
2,407
2,404
2,075
1,923
1,852
Personnel expense
D million
585
565
526
684
728
720
711
654
620
622
D million
523
479
520
465
392
329
308
279
259
242
%
10.8
10.5
11.9
9.7
8.4
7.3
6.8
6.7
6.7
6.3
D million
358
307
315
280
209
174
140
167
146
114
as % of sales
%
7.4
6.7
7.2
5.9
4.5
3.8
3.1
4.0
3.8
3.0
Earnings per share
D
1.73
1.48
1.52
1.45
1.30
1.04
0.89
1.02
0.89
0.78
1,000 t
31,053
26,717
29,744
25,030
22,251
23,432
21,224
20,294
19,718
19,416
1,000 t /day
341
359
336
342
290
279
245
245
233
233
Sugar production
1,000 t
5,132
4,442
4,707
4,010
3,491
3,596
3,078
3,169
3,103
2,819
Sugar sales volumes
1,000 t
4,690
4,746
4,514
4,694
3,617
3,414
3,282
3,149
2,816
2,851
D
0.554
0.50)
0.50
0.47
1.34
0.87
0.33
0.33
0.33
0.30
D million
96
87
87
82
193
120
47
46
43
36
as % of non-current assets Current assets less current liabilities Capital expenditures in tangible assets Investments in financial assets
1
2
as % of sales
Operating profit
3
as % of sales Net earnings for the year
Beet processing Beet processing capacity
Dividend per D 1 ordinary share Total dividend distribution 1 Including intangible assets. 2 Including acquisitions of consolidated subsidiaries.
3 Until 1997/1998 adjusted income from ordinary operating
activities per German accounting principles (HGB). 4 Proposed.
Key figures
IFRS/IAS
IFRS/IAS
IAS
IAS
IAS
IAS
IAS
HGB
HGB
HGB
2004/05
2003/04
2002/03
2001/02
2000/01
1999/2000
1998/99
1997/98
1996/97
1995/96
17,494
17,973
14,855
23,638
28,415
29,579
25,619
20,394
19,239
19,539
Group Employees (average during the year) Total assets
D million
7,195
6,038
5,826
5,843
4,947
4,677
4,588
3,597
3,622
3,196
Non-current assets
D million
4,094
3,359
3,237
3,303
2,387
2,450
2,436
1,662
1,741
1,605
Shareholders’ equity
D million
2,738
2,386
2,221
2,010
1,703
1,619
1,553
904
1,016
867
as % of total liabilities and shareholders’ equity
%
38.1
39.5
38.1
34.4
34.4
34.6
33.8
25.1
28.1
27.1
Medium-term and long-term third-party liabilities
D million
2,163
2,039
1,813
1,928
1,598
1,502
1,523
1,123
1,094
1,097
Total shareholders’ equity, medium-term and long-term liabilities
D million
4,901
4,425
4,034
3,938
3,301
3,121
3,076
2,028
2,110
1,964
%
119.7
131.7
124.6
119.2
138.3
127.4
126.3
122.0
121.1
122,4
D million
807
1,066
797
635
914
671
640
366
369
359
D million
500
307
207
219
215
233
238
209
213
194
D million
590
181
46
1,671
37
87
209
184
209
77
Total capital expenditures
D million
1,090
488
253
1,890
252
320
447
393
422
271
Gross cash flow from operating activities
D million
550
522
580
551
498
472
464
480
437
410
%
11.4
11.4
13.2
11.5
10.7
10.5
10.3
11.5
11.3
10.7
Revenues
D million
4,827
4,575
4,384
4,776
4,664
4,517
4,504
4,187
3,885
3,826
of which foreign
D million
3.495
3,135
3,024
2,672
2,404
2,407
2,404
2,075
1,923
1,852
Personnel expense
D million
585
565
526
684
728
720
711
654
620
622
D million
523
479
520
465
392
329
308
279
259
242
%
10.8
10.5
11.9
9.7
8.4
7.3
6.8
6.7
6.7
6.3
D million
358
307
315
280
209
174
140
167
146
114
as % of sales
%
7.4
6.7
7.2
5.9
4.5
3.8
3.1
4.0
3.8
3.0
Earnings per share
D
1.73
1.48
1.52
1.45
1.30
1.04
0.89
1.02
0.89
0.78
1,000 t
31,053
26,717
29,744
25,030
22,251
23,432
21,224
20,294
19,718
19,416
1,000 t /day
341
359
336
342
290
279
245
245
233
233
Sugar production
1,000 t
5,132
4,442
4,707
4,010
3,491
3,596
3,078
3,169
3,103
2,819
Sugar sales volumes
1,000 t
4,690
4,746
4,514
4,694
3,617
3,414
3,282
3,149
2,816
2,851
D
0.554
0.50)
0.50
0.47
1.34
0.87
0.33
0.33
0.33
0.30
D million
96
87
87
82
193
120
47
46
43
36
as % of non-current assets Current assets less current liabilities Capital expenditures in tangible assets Investments in financial assets
1
2
as % of sales
Operating profit
3
as % of sales Net earnings for the year
Beet processing Beet processing capacity
Dividend per D 1 ordinary share Total dividend distribution 1 Including intangible assets. 2 Including acquisitions of consolidated subsidiaries.
3 Until 1997/1998 adjusted income from ordinary operating
activities per German accounting principles (HGB). 4 Proposed.
Segment overview
SUGAR SEGMENT Revenues Operating profit Operating margin ROCE Capital expenditures in tangible assets Investments in financial assets Employees Beet processed Sugar production
8
2004/05 D 3,518 D 360 10.2 10.3 D 144 D 473 12,001 31.0 5.1
THE GROUP Revenues Operating profit Operating margin ROCE Capital expenditures in tangible assets Investments in financial assets Employees
million million % % million million million t million t
GERMANY
ROMANIA
11 sugar factories Sugar production: 1,806,000 t
2 sugar factories (of which one refinery) Sugar production: 183,000 t
FRANCE
HUNGARY
5 sugar factories and one refinery Sugar production: 1,111,000 t
2 sugar factories Sugar production: 161,000 t
BELGIUM
THE CZECH REPUBLIC
3 sugar factories Sugar production: 660,000 t
2 sugar factories Sugar production: 113,000 t
POLAND
SLOVAKIA
12 sugar factories Sugar production: 518,000 t
2 Sugar factories Sugar production: 65,000 t
AUSTRIA
MOLDOVA
3 sugar factories Sugar production: 458,000 t
3 sugar factories Sugar production: 58,000 t
2004/05 D 4,827 D 523 10.8 11.3 D 500 D 590 17,494
million million % % million million
SPECIAL PRODUCTS SEGMENT Revenues Operating profit Operating margin ROCE Capital expenditures in tangible assets Investments in financial assets Employees
2004/05 D 1,309 D 163 12.4 14.3 D 356 D 117 5,493
million million % % million million
ORAFTI/PALATINIT Development, production and marketing of food ingredients such as inulin, oligofructose, Isomalt and rice-based starch products
STARCH Development, production and marketing of starch for use in the food and non-food sectors 2 production locations in Austria; processing of 280,000 t of corn and 204,000 t of potatoes 1 production location in Hungary and Romania
PORTIONPACK EUROPE Production and marketing of portion pack articles
SURAFTI Production and marketing of sugar-based food ingredients
FREIBERGER Development, production and marketing of deep-frozen pizzas, pastas and baguettes as well as chilled pizzas 5 production locations
BIOETHANOL Development, production and marketing of bioethanol for the energy sector 3 production locations
FRUIT Development, production and marketing of fruit additives and fruit-juice concentrates 37 production locations world-wide (of which 14 outside Europe)
9
Supervisory board and executive board*
Supervisory
board
Dr. Hans-Jörg Gebhard
Manfred Fischer**
Ronny Schreiber**
Chairman Eppingen Chairman of the Association of Süddeutscher Zuckerrübenanbauer e. V.
Feldheim Chairman of the central works council of Südzucker AG Mannheim/Ochsenfurt
from 29 July 2004 Einhausen Chairman of the works council Mannheim head office Südzucker AG Mannheim/Ochsenfurt
Paul Freitag Dr. Christian Konrad Deputy chairman Vienna, Austria Chairman of the supervisory board of AGRANA Beteiligungs-AG, Vienna
✝ 9 April 2005 Oberickelsheim-Rodheim Chairman of the Association of Fränkischer Zuckerrübenbauer e. V.
Ernst Wechsler Westhofen Chairman of the Association of Hess.Pfälzischen Zuckerrübenanbauer e. V.
Erwin Hameseder Franz-Josef Möllenberg** Deputy chairman Rellingen Chairman of the Food and Catering Union
Roland Werner**
Mühldorf, Austria Managing director of RaiffeisenHolding Niederösterreich-Wien reg. Gen.m.b.H.
Saxdorf Chairman of the works council of the Brottewitz works of Südzucker AG Mannheim/Ochsenfurt
Hans Hartl** Heinz Christian Bär Karben – Burg Gräfenrode Vice-president of the Deutschen Bauernverbands e. V.
Ergolding State area chairman of the Food and Catering Union in Bavaria
Members who retired at the conclusion of the annual general meeting on 29 July 2004:
Klaus Kohler** Gerlinde Baumgartner** Osterhofen Member of the works council of the Plattling works of Südzucker AG Mannheim/Ochsenfurt
Helmut Drescher**
Bad Friedrichshall Chairman of the works council of the Offenau works of Südzucker AG Mannheim/Ochsenfurt
Wattenheim Former chairman of the central works council of Südzucker AG Mannheim/Ochsenfurt
Erhard Landes Dr. Ulrich Brixner Dreieich Chairman of the executive board of DZ BANK AG
from 29 July 2004 Donauwörth Chairman of the Association of bayerischer Zuckerrübenanbauer e. V.
Ludwig Eidmann
Jörg Lindner**
Groß-Umstadt Chairman of the Association of Hessen-Nassauischen Zuckerrübenanbauer e. V.
Malterdingen Former divisional officer Food and Catering Union
Erich Muhlack** Regensburg Former manager of the Südzucker AG Mannheim/Ochsenfurt Plattling, Rain and Regensburg works
Richard Schwaiger Aiterhofen Honorary chairman of the Association of bayerischer Zuckerrübenanbauer e. V.
Ulrich Müller Dr. Jochen Fenner from 11 May 2005 Gelchsheim Chairman of the Association of Fränkischer Zuckerrübenbauer e. V.
Klaus Viehöfer**
Illsitz Chairman of the Association of Sächsisch-Thüringischer Zuckerrübenanbauer e. V.
Grana Former member of the works council of the Zeitz works of Südzucker AG Mannheim/Ochsenfurt
Dr. Arnd Reinefeld** Egon Fischer** from 29 July 2004 Offstein Deputy chairman of the works council ZAFES Offstein Südzucker AG Mannheim/Ochsenfurt
from 29 July 2004 Offstein Manager of the Südzucker AG Mannheim/Ochsenfurt Offstein and Groß-Gerau works
*
A listing of other board memberships is set out on page 106 of this annual report. ** Employee representative.
10
Executive
board
Dr. Theo Spettmann
Dr. Christoph Kirsch
Johann Marihart
(Spokesman) Ludwigshafen
Weinheim/Bergstraße
Limberg, Austria
Finance Accounting Financial management/controlling Operational corporate policy Taxation Legal matters Property/insurance Procurement of supplies and consumables
Chairman of the executive board of AGRANA Beteiligungs-AG Raw material crops/starch South-eastern Europe
Sugar sales Strategic corporate planning/ group development/investments Public relations Organisation/IT Food law/consumer policy/ quality control Personnel and social matters Marketing
Albert Dardenne
Thomas Kölbl (deputy)
Melin, Belgium
from 1 June 2004 Mannheim
Administrateur délégué of Raffinerie Tirlemontoise S.A. ORAFTI Surafti PortionPack
Dr. Rudolf Müller Ochsenfurt Agricultural policies Beet/animal feed and by-products Farms Research and development in the agricultural area Audit Poland
Prof. Dr. Markwart Kunz Worms
Frédéric Rostand Production/technical Research/development/services Procurement of capital goods/ maintenance materials, services Palatinit Bioethanol (Germany, Hungary)
Paris, France Chairman of the executive board of Saint Louis Sucre S.A. Bioethanol (France)/cane sugar
Members of the executive board. From left. Dr. Rudolf Müller, Frédéric Rostand, Dr. Christoph Kirsch, Dr. Theo Spettmann, Prof. Dr. Markwart Kunz, Albert Dardenne, Johann Marihart, Thomas Kölbl.
11
Agenda of the annual general meeting
We invite our shareholders to the
annual general meeting to be held at the Congress Centre Rosengarten, Rosengartenplatz 2, 68161 Mannheim, on Thursday 28 July 2005, at 10.30 a.m. 1.
Presentation of the annual financial statements, the approved consolidated financial statements and the management report of Südzucker AG Mannheim/Ochsenfurt and the group for 2004/05, together with the report of the supervisory board
2.
Appropriation of retained earnings
3.
Ratification of the acts of the executive board for 2004/05
4.
Ratification of the acts of the supervisory board for 2004/05
5.
Establishment of new authorised capital
6.
Changes to the by-laws (UMAG)
7.
Election of auditors for 2005/06
Proposals regarding the resolutions
Shareholders will have pre-emptive rights to subscribe to the new shares, and it is not foreseen that such pre-emptive rights will be waived.
Item 2 on the agenda: The executive board and supervisory board propose that the retained earnings of € 96,185,083.52 be
Hence, the executive board and supervisory board
appropriated as follows:
recommend that the following resolution be adopted:
Distribution of a dividend of € 0.55 per share
a) The executive board is empowered until 30 June
€
96,133,370.30
2010, with the approval of the supervisory board, to
Carried forward to the new year €
51,713.22
increase the company’s share capital in one or more
€
96,185,083.52
on 174,787,946 ordinary shares Retained earnings
tranches by up to a total of € 17,500,000.00 (in words: seventeen million five hundred thousand euros) by
The dividend will be distributed on 29 July 2005.
issuing new bearer shares for cash totalling up to € 205,000,000.00 (in words: two hundred and five
Items 3 and 4 on the agenda:
million euros) (authorised capital).
The executive board and supervisory board recommend that their actions for 2004/05 be ratified.
The new shares are to be offered to existing shareholders as pre-emptive rights. The amount of each
Item 5 on the agenda:
capital increase is to be calculated in such a manner
The executive board and the supervisory board re-
that there are no rounding amounts.
commend that authorised capital be established in
12
order to enable the company to meet any need for
The supervisory board is empowered to change § 4 of
capital quickly and flexibly. Up to 17.5 million new
the by-laws following the complete or partial increase
shares would be available for issue for cash totalling
of the share capital or upon expiry of the period of
a maximum of € 205 million.
empowerment.
b) The following paragraph 5 is to be added to § 4 of
27 July 2006, the executive board and supervisory
the by-laws:
board recommend that the following changes to the by-laws be resolved:
“(5) The executive board is empowered until 30 June 2010, with the approval of the supervisory
1. § 14 of the by-laws is amended as follows:
board, to increase the company’s share capital in one or more tranches by up to a total of
“The annual general meeting will be announced
€ 17,500,000.00 (in words: seventeen million five
by the executive board or, in those instances pres-
hundred thousand euros) by issuing new bearer
cribed by the law, by the supervisory board, at
shares for cash totalling up to € 205,000,000.00
least 30 days before the day upon the expiry of
(in words: two hundred and five million euros)
which the shareholders must register to attend
(authorised capital).
the meeting (see § 15 paragraph 2).”
The new shares are to be offered to existing share-
2. § 15 paragraphs 2 and 3 are amended as follows:
holders as pre-emptive rights. The amount of each capital increase is to be calculated in such a man-
“2. Only those shareholders are entitled to attend
ner that there are no rounding amounts.”
the annual general meeting and exercise their voting rights who have registered in writing at the address given in the invitation to the annual
Item 6 on the agenda:
general meeting at the latest by the end of the
The government’s draft law on corporate integrity and
seventh day before the day of the annual general
modernisation of the disputs law (UMAG) foresees,
meeting.
amongst other matters, a change to the requirements relating to attendance at the annual general meeting.
3. Shareholders must also provide evidence of
The by-laws will be able to to make attendance at
their entitlement to attend the annual general
the annual general meeting or the exercise of voting
meeting and exercise their voting rights. For this
rights dependent upon shareholders registering before
purpose, evidence provided in writing by the
the meeting. Furthermore, the by-laws can set out for
custodial bank or financial services institution of
bearer sharers how the entitlement to attend the
their share ownership is sufficient. The evidence
annual general meeting or exercise voting rights is to
must be provided in German or English as at the
be evidenced. In addition, UMAG contains a requirement
day set out in § 123 paragraph 3 sentence 3 AktG;
for determining the period of notice to be given when
it is to be submitted to the address set out in the
calling an annual general meeting.
invitation to the annual general meeting.”
The government has declared its intention that the
3. The executive board is instructed to file these
UMAG will enter into force on 1 November 2005.
changes in the by-laws for entry in the company’s commercial register when, and only when, the rele-
In anticipation of the future requirements set out in
vant provisions set out in UMAG relating to registra-
the UMAG and also particularly in order to clarify the
tion and attendance at the annual general meeting
legal position regarding the conditions for attendan-
enter into force.
ce at the company’s next annual general meeting on
13
Agenda of the annual general meeting
Item 7 on the agenda:
and who are required to comply with proxy voting
The supervisory board proposes that Pricewaterhouse-
instructions. Shareholders who wish to appoint a
Coopers Aktiengesellschaft Wirtschaftsprüfungsge-
person named by the company to act as their voting
sellschaft, Frankfurt/Main, be appointed auditors for
representative require an entrance ticket to the an-
2005/06.
nual general meeting. A power of attorney to the benefit of a person named by the company to act as voting representative requires explicit voting instruc-
Attendance at the annual general meeting/proxy voting rights
tions regarding the resolution concerned. A power of attorney must be in writing. The documentation and information required will be received by shareholders
Ordinary shareholders are entitled to attend the an-
together with their entrance tickets.
nual general meeting and to exercise their voting rights on condition they deposit their shares by 21 July 2005
Shareholders’ opposing resolutions and voting re-
at the latest, either with the company or a securities
commendations are to be submitted only to the fol-
depository bank, a German notary public or at bran-
lowing address by the end of 13 July 2005:
ches of the banks listed below, and to leave them in the safe custody of these depositories until after the
Südzucker AG Mannheim/Ochsenfurt
annual general meeting:
Investor Relations Maximilianstraße 10
Deutsche Bank AG
68165 Mannheim
DZ BANK AG
Telefax: +49 (0) 621/421-463
Dresdner Bank AG
e-mail:
[email protected]
If shares are deposited with a notary public or securi-
Shareholders’ proposed resolutions and voting recom-
ties depository bank, the original certificate of deposit
mendations will be published immediately after their
or a notarised copy thereof must be submitted to the
receipt at the following internet address:
company by 22 July 2005 at the latest. www.suedzucker.de/investorrelations/de/ Shareholders shall be deemed to have deposited their
hauptversammlung/
shares in the proper manner if their shares are held at another bank with the agreement of an officially-
Any comments thereon made by the company are also
recognised depository until the annual general mee-
published at this website address. The invitation to
ting has been concluded.
the annual general meeting and the annual report are also available at this address.
Shareholders who deposit their shares can exercise their voting rights without personally attending the
The invitation will be published in the electronic
annual general meeting by authorising whomsoever
Federal Gazette on 27 May 2005.
they elect (for example a bank or a shareholder association) to exercise their voting rights. Mannheim, May 2005 The company also offers its shareholders the oppor-
14
tunity to appoint persons named by the company,
Südzucker Aktiengesellschaft Mannheim/Ochsenfurt
who are authorised to act as voting representatives
The executive board
Report of the supervisory board
Dear shareholders,
As in the previous year, the supervisory board extensively discussed the topic of corporate governance.
2004/05 was a year in which Südzucker concentrated
After Südzucker had already met the recommen-
on further developing the group’s structure and inte-
dations set out in the German corporate governance
grating companies within the group. Particular atten-
code issued by the government commission, the
tion was directed to discussions of the future format
executive board and supervisory board resolved on
of the sugar market regulation.
24 November 2004 to adopt these recommendations in the current version of the code also in the future,
The supervisory board fulfilled its duties set out in the
with one exception relating to executive board and
law and the company’s by-laws and closely tracked
supervisory board remuneration.
and advised on the executive board’s management of operations on an ongoing basis. At its four meetings
Südzucker shows the remuneration of the executive
in 2004/05, the supervisory board intensively discussed
board and supervisory board divided into fixed and
all matters relevant for the company relating to the
performance-related components. Südzucker AG has
group’s position, the group’s strategic development,
no share option program. The recommendation of the
its existing and new operating activities, matters
code to show individual remuneration of members of
concerning the future of the EU sugar market regula-
the executive board and supervisory board has not been
tion, as well as many other specific topics. Based on
followed as, in our opinion, the resulting intrusion in
regular written reports, the supervisory board discussed
the private sphere bears no reasonable relation to the
all significant transactions with the executive board
usefulness of such practice. We assess the code as
and carefully supervised management and, in this
being balanced and practicable and thus see no reason
connection, advised management on the strategic
to prepare company-specific principles.
development of the company and significant individual matters. Between meetings, the executive board
At its meetings, the audit committee dealt with ac-
reported orally and in writing on events of significant
counting policy matters such as the new treatment
importance for the company. The chairman of the
of goodwill, risk management and investment con-
supervisory board also attended executive board
trolling, as well as monitoring the independence of
meetings and met regularly with the spokesman of
the external auditors.
the executive board to discuss all significant events in many working meetings. This ensured a timely and
Based on the resolution of the annual general meeting,
extensive flow of information between the supervisory
the audit committee appointed PwC Deutsche
board and executive board. Significant regular oral
Revision Aktiengesellschaft Wirtschaftsprüfungsge-
and written reports by the executive board included
sellschaft, Frankfurt/Main, to audit the financial state-
the position and development of the company, busi-
ments for 2004/05. A declaration of independence
ness policy and profitability, as well as corporate,
was received from PwC Deutsche Revision AG and
treasury, capital expenditure, research and personnel
checked before its appointment. This review revealed
budgets. The supervisory board also had a number of
that there were no, in particular no financial, relations
discussions on the effects of a new format for the
between Südzucker and PwC Deutsche Revision AG
sugar market regulation, corporate governance, and
which could lead to doubt as to the independence of
opportunities for the bioethanol, fruit and functional
the external auditors.
food products divisions.
15
Report of the supervisory board
Together with the external auditors, the audit com-
In order to ensure continuity within the executive
mittee discussed in detail the documentation suppor-
board, the supervisory board appointed Thomas Kölbl
ting the financial statements and reported to the
to be deputy member of the executive board with
supervisory board. In accordance with the recommen-
effect from 1 June 2004.
dations of the German corporate governance code, the chairman of the audit committee is not the same
The financial statements of Südzucker AG and the
person as the chairman of the supervisory board.
management report for 2004/05, including the bookkeeping, were audited by PwC Deutsche Revision
Helmut Drescher, Erich Muhlack, Richard Schwaiger
Aktiengesellschaft Wirtschaftsprüfungsgesellschaft,
and Klaus Viehöfer resigned their memberships of the
Frankfurt/Main, and they issued an unqualified audit
supervisory board as at the close of the annual general
report. This also applies to the consolidated financial
meeting on 29 July 2004. Egon Fischer, Erhard Landes,
statements, prepared using IFRS, and to the group
Dr. Arnd Reinefeld and Ronny Schreiber were appointed
management report. As set out in § 292a of the
as members of the supervisory board in their place.
German Commercial Code, the attached IFRS consoli-
The supervisory board thanks the retiring members for
dated financial statements exempt the group from
their long and constructive co-operation within the
preparing consolidated financial statements in accor-
supervisory board and for their work for the benefit
dance with German accounting rules. The supervisory
of the company.
board has had sight of all documentation relating to the financial statements and the recommendation by
Paul Freitag, chairman of the Verband Fränkischer
the executive board on appropriation of earnings,
Zuckerrübenbauer e.V., died suddenly and unexpec-
including the long-form audit report issued by the
tedly on 9 April 2005. Paul Freitag applied extraordi-
auditors. They have been examined by the audit com-
nary efforts and energy in representing the interests
mittee and the supervisory board and discussed in the
of the Franconian and south German sugar industry.
presence of the auditors. The supervisory board agrees
He was a member of the executive board of the
with the results of the audit carried out by the exter-
association of Franconian beet farmers from 1978
nal auditors and, as a result of its own examination,
and chairman from 1993, was a member of the
determined no matters which would lead to any re-
supervisory board of the Süddeutsche Zuckerrüben-
servations.
verwertungsgenossenschaft from 1979 and its chairman from 1993, as well as being a member of the
At its meeting on 24 May 2005, the supervisory board
supervisory board of Südzucker AG Mannheim/Och-
approved the financial statements of Südzucker AG
senfurt from 1993. As such, he made a significant
and the consolidated financial statements for 2004/05
contribution to the development of the south German
and thus adopted the financial statements of
sugar beet industry and the successful growth of the
Südzucker AG. They also agreed the executive board’s
Südzucker Group. The supervisory board loses a signi-
recommendation on appropriation of earnings, with
ficant personality in Paul Freitag and the company
a proposed distribution of a dividend of € 0.55 per
owes him a great debt of thanks. Dr. Jochen Fenner,
share.
chairman of the Verband Fränkischer Zuckerrüben-
16
bauer e.V., was appointed to the supervisory board in
In view of the information provided by Süddeutsche
his place with effect from 11 May 2005.
Zuckerrübenverwertungs-Genossenschaft eG (SZVG),
Corporate governance
Stuttgart, the executive board has prepared a report
Sound and transparent corporate governance ensures
on related party transactions in accordance with § 312
that management and control of a company is directed
Stock Corporation Law. The external auditors have
towards responsible and lasting value added. It en-
audited this report, reported in writing on the results
courages the trust of national and international in-
of their audit and issued the following opinion:
vestors, financial markets, business partners, staff and the general public in the management and control of
"As a result of our audit, which we carried out in ac-
Südzucker Group.
cordance with professional standards, we confirm that:
Sound corporate governance is of great importance to the group’s success. Constructive co-operation
1. the facts set out in the report are correct,
between the executive board and supervisory board has traditionally been one of our company’s significant
2. charges to the company for business transac-
success factors. The executive board and supervisory
tions listed in the report were not unreasonably
board have joint responsibility for ensuring that
high,
Südzucker regularly reviews and continuously develops its corporate governance activities throughout
3. with respect to the matters listed in the report,
the group.
there were no reasons for a materially different conclusion than that taken by the executive board."
Südzucker views the German corporate governance code in its current version dated 21 May 2003 to be
The supervisory board reviewed and approved the re-
balanced and practical. The principles embedded in
sults of the audit by the external auditors. Following
the code are substantially in line with our understan-
its own audit, the supervisory board found no reasons
ding of corporate governance. For this reason, and as
to contradict the declaration of the executive board at
in previous years, we have waived preparation of
the end of the report.
additional principles for the company itself.
Together with the executive board, the members of
The only recommendation set out in the code which
the supervisory board would like to pay their respects
we do not follow is the presentation of executive bo-
to those active and former employees of the group
ard and supervisory board remuneration by individual.
who passed away during the year. The supervisory
We consider that there is no reasonable balance bet-
board thanks the executive board and all employees
ween interference in the private sphere of individuals
of Südzucker AG and its affiliated companies for their
and the usefulness of detailing individual remuneration.
performance during the year.
As in previous years, we set out the total remuneration of the executive board and supervisory board,
Mannheim, 24 May 2005
divided into fixed and variable elements, in note (34) to the financial statement in this annual report. Südzucker
THE SUPERVISORY BOARD
has no share option program.
Dr. Hans-Jörg Gebhard Chairman
The executive board and supervisory board submitted a declaration of compliance with the German corporate governance code on 24 November 2004. This can be viewed on our website under www.suedzucker.de/ investorrelations/de/governance/.
17
Südzucker share
Capital market environment and
Südzucker share price movement From March 2004 to April 2005 in D
share price movement
17
half of 2004/05. The lack of economic momentum,
16
high oil price levels and a weaker US dollar led to
Global stock exchanges trended sideways in the first
reticent investor behaviour. Tentative buying interest
15
in the last few months of the year led to a rise of
14 March April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March April 2004 2004 2004 2004 2004 2004 2004 2004 2004 2004 2005 2005 2005 2005
7.0 % in the DAX, to 4,350 points. Hence, following the major losses suffered over the past few years, the DAX was able to recover to more than half its
Latest quotation: www.suedzucker.de/en/investorrelations/shares
highest level of 8,136 points achieved in 2000. On the other hand, the MDAX rose by 18.4 % to 5,772 points in the last few months of the year, slightly Südzucker share price movement compared with the DAX /MDAX
below its historic high of 5,815 points.
(Indexed) Index 250
Südzucker’s share price initially rose to € 17.31 in
200
June 2004 before falling back to € 14.15 in November 2004. At 28 February 2005, the Südzucker share price
150
was € 16.18 and thus showed an increase of 4.1 %
100
compared with its price at the end of the previous
50
year. When considering the dividend distribution of € 0.50 for 2003/04, the rise compared with the preMarch Sept. March Sept. March Sept. March Sept. March Sept. March 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005
vious year was 7.3 %. Thus, the Südzucker share
Südzucker
industry index within the Dow Jones STOXX 600,
MDAX
DAX
price performed better than the Food and Beverage which only rose by 1.4 % over the same period. The price/earnings ratio was 9.4 compared with an
Long-term increase in Südzucker share value
average PE of 16.4 for the DAX, or 19.9 for the
assuming re-investment of dividend (excluding tax credit) and rights Value in D thousands 70
MDAX.1
60 50 40 30 20 10 28.02. 1991
18
28.02. 1993
28.02. 1995
28.02. 1997
28.02. 1999
28.02. 2001
28.02. 2003
28.02. 2005
Long-term increase in value
Market capitalisation and indices
The Südzucker share has proven to be an attractive
Our market capitalisation increased by € 110 million
investment long-term, both in absolute and relative
to € 2,828 million at 28 February 2005.
terms. An investor acquiring Südzucker shares for the equivalent of € 10,000 on 1 March 1988 (beginning
The Südzucker share’s weighting in the German MDAX,
of the financial year in which the merger with Zucker-
a major index for capital markets and a measure for
fabrik Franken took place), using cash dividends to
fund managers, is 1.6 %. As well as the MDAX, the
re-invest in new shares and taking up pre-emptive
Südzucker share is included in other international
rights to participate in capital increases, would have
indices. These include MSCI in Germany, the Dow
had a portfolio with a value of € 67,642 on 28 Fe-
Jones STOXX 600 and the FTSE Euromid index.
bruary 2005. This represents an average annual growth of 11.9 %. Over the same period, the DAX on-
Turnover of Südzucker shares increased sharply over
ly rose by an annual 8.8 %. and the MDAX by 10.5 %.
the entire year, by 10 % to € 1.9 billion, and this now represents twice the free float market capitalisation.
In a broad-based evaluation of more than 6,000
The increased liquidity of the Südzucker share is un-
companies world-wide, “Focus Money“, a business
derlined by its average daily share turnover, which
magazine, filtered out, together with Thomson Financi-
rose to 479,000 (452,000) shares per trading day.3
al Datastream, those companies which have recorded an uninterrupted stream of profits (before interest and taxes) over the past 25 years. Südzucker performed extremely well and, with an average annual growth of 13.1 % p.a. over this long period of time, was number one of all German companies.2
1 Source: The Deutsche Bank German Equities Universe, 24.02.05. 2 Source: Focus Money, 14/2005. 3 Source: Clearstream Banking.
Ratings Südzucker AG is rated by the leading rating
Südzucker share data
agencies Moody´s Investor Service and Standard and Poor´s. In March 2004 Moody´s issued a rating
2004/05
2003/04
1
0.50
of A 3. Thus, the two rating agencies have issued
Dividend
D
the same long-term rating of A 3 and A- respecti-
Dividend yield
%
3.4
3.2
Price at the end of the year2
D
16.18
15.55
vely. The outlook is rated by Moody´s as “negative” and by Standard and Poor´s as “stable“.
Market capitalisation at end of year
D million
Number of issued H 1 shares
0.55
2,828
2,718
174,787,946
174,787,946
Key ratios Earnings per share
D
1.73
1.48
Cash flow per share
D
3.15
3.03
9.4
10.7
Price earnings ratio Price cash flow ratio ROCE 1
%
5.1
5.1
11.3
11.7
Proposed. 2Closing price, Frankfurt stock exchange.
19
Südzucker share
Shareholder structure
56 % SZVG
We provide comprehensive information on our website about Südzucker and the Südzucker share to our shareholders, investors, analysts and all other inter-
34 % Free Float
ested parties. Quarterly reports can be downloaded from our website on the day they are released, thus contributing towards providing rapid, real-time infor-
10 % ZSG
mation to all interested parties. The most recent update of our website has again resulted in an expansion in the volume of information provided. Links to our group companies supplement and add to the information about Südzucker Group.
Shareholder structure Süddeutsche Zuckerrübenverwertungs-Genossen-
We organised roadshows at Europe’s financial centres
schaft eG (SZVG) continues to hold a majority of
and in New York for our institutional investors and
56 % with its own shares and those shares held by
analysts and, in addition, took part in many individual
them on trust for their own shareholders. Other in-
discussions. The increased interest in Südzucker is also
vestors include our Austrian shareholders, via ZSG,
shown in a further rise in the number of participants
with 10 %. Hence, 34 % of Südzucker shares are
at the DVFA analysts’ conference in Frankfurt in May
widely held (free float).
2004, held after our financial statement conference. We also had the opportunity of describing Südzucker
Investor relations
Group’s strategy and business activities to a broader
As in the past, our activities have been particularly
public at other analyst and investor conferences, as
directed towards informing analysts, institutional in-
well as at the Mannheim capital market forum, atten-
vestors, rating agencies and our private shareholders
ded by some 600 private investors in September
timely about Südzucker. The annual general meeting
2004.
and our internet homepage have a central part to play in informing our private shareholders about strategy and performance of the business. 2,700 shareholders, 300 more than in the previous year, attended the annual general meeting in Mannheim on 29 July 2004, whereby the presence of shareholders holding capital with voting rights declined by 0.8 percentage points to 81.5 %. Following intensive discussions, all the points on the agenda were resolved by a majority of more than 99 %. There was a continuing increase in the number of hits to our internet homepage, www.suedzucker.de.
20
Higher dividend for 2004/05 The executive board and supervisory board will recommend to the annual general meeting on 28 July 2005 that the dividend be increased from € 0.50 to € 0.55 per share. The total distribution will then increase from € 87.4 million to € 96.1 million. With this dividend recommendation we are sticking to our results-based dividend policy, which has led to an average increase of 11 % p. a. in the amounts distributed to our shareholders over the past 25 years.
Growth in dividends in D million 36.5
1995/96
42.7
1996/97 1997/98
46.2
1998/99
46.7
1999/2000
47.5 49.9
2000/01
+72.2 special dividend +143.0 special dividend
82.2
2001/02
87.4
2002/03
87.4
2003/04
Over the past few years, dividend returns have de-
2004/05
(Proposed)
96.1
veloped into an important investment criterion for capital markets. Using the dividend recommendation of € 0.55 per share, the Südzucker share has a return of 3.4 %. The average dividend return for the DAX is 2.5 %, and for the MDAX is 1.9 %1. When considering the rules for paying tax on half of dividend distributions, the dividend return is more advantageous than fully taxable interest, such as
Südzucker AG securities data Südzucker ordinary shares DE 000 729 700 4 Exchange: XETRA, Frankfurt, Stuttgart, Munich, Hamburg, Berlin, Düsseldorf, Hanover (OTC) 6.25 % bond 2000/2010
federal government bond (Bund) (at 28 February
DE 000 178 080 7 Exchange: Frankfurt (official), Stuttgart and Berlin (OTC)
2005).
5.75 % bond 2002/2012
2.1 % for 3-month EURIBOR or 3.7 % for a 10-year
DE 000 846 102 1 Exchange: Frankfurt (official), Stuttgart and Düsseldorf (OTC) 3.0 % convertible bond 2003/2008 DE 000A0 AABH 1 Exchange: Frankfurt (official), Stuttgart (OTC) 1 Source: The Deutsche Bank German Equities Universe, 24.02.05.
Diary dates
Report 1st Quarter 2005/06
15 July 2005
Annual shareholders’ meeting 2004/05
28 July 2005
nd
14 October 2005
rd
Report 3 Quarter 2005/06
13 January 2006
Press and analysts conference 2005/06
31 May 2006
Report 2 Quarter 2005/06
st
Report 1 Quarter 2006/07
14 July 2006
Annual shareholders’ meeting 2005/06
27 July 2006
21
id e to
22
fulfil
prospects
a s
THE IDEA: Energy from renewable raw materials, such as corn and sugar beet, to fuel a mobile future. THE PROSPECTS: Bioethanol reduces our dependence on oil, relieves the environment and affords new agricultural opportunities. Südzucker is right at the forefront, with Europe's largest bioethanol plant. 23
Foreword by the executive board
Dear shareholders,
Südzucker Group continued its success story in 2004/05. Our strength lies in the fact that we are a broadly-based group with a magnificent growth portfolio, which we are successfully expanding with an investment offensive exceeding € 2 billion in the last three years alone. In the sugar segment, we concentrate on maximising our competitive raw material base, extending European market leadership and cementing our position by concentrating on quality and service. In the functional food sector, we are rigorously expanding our position on global markets, particularly by customer-oriented innovation, using the trend towards high-quality wellness products. This also applies to the successful expansion of our global fruit division. By commencing production of bioethanol, we are also securing our participation in a forward-looking market with high growth potential.
Our objective is to rigorously and continuously increase the value of the company and its shares in the interests of our shareholders, staff and society. We see the key to success in a sustained corporate strategy based on innovation and earnings power. The correct response to future restrictions within the European sugar market has been our timely expansion of the special products segment, in which we invested € 473 million in 2004/05 alone.
Our dual strategy of optimising the sugar segment in all its facets and, at the same time, securing future growth by establishing a broadly-based innovation and capital expenditure initiative within our core competencies, is working. 24
AGRANA’s newly-established fruit division, with its global activities, will alone achieve revenues of € 800 million in the next two years; our bioethanol factory in Zeitz, the largest plant of its type in Europe, started operations in 2005.
Part of our growth has been achieved internally, by gaining market share, introducing new product categories and entering into new markets. We grow through acquisitions when they are strategically in line with our core business, have high-quality revenues, allow us to expand our market share and meet our earnings targets. However, the acquisition must always conform with our corporate culture and meet the sustainability criterion.
Our group’s financial success is based on our strategic and organisational repositioning, and is reflected in the positive numbers set out in the 2004/05 consolidated financial statements. Group revenues increased by 5.5 % to € 4.8 billion (€ 4.6 billion) and operating profit grew even further, by 9.2 % to € 523 million (€ 479 million), despite the EU commission not making a temporary reduction in quotas, which led to an additional one million tonnes of sugar burdening the market.
Revenues for the sugar segment grew by 3.6 % to € 3.5 billion (€ 3.4 billion) and operating profit increased by 7.7 % to € 360 million (€ 335 million). This growth in sales and profitability is mainly attributable to the success of the eastern European sugar companies.
25
Foreword by the executive board
Turnover in the special products segment rose by 11.0 % to € 1.3 billion (€ 1.2 billion) and operating profit grew by 12.5 % to € 163 million (€ 144 million).
Due to these positive factors, the group’s operating margin rose to 10.8 % (10.5 %). Following the substantial volume of capital expenditures, despite the increase in profits, return on capital employed (ROCE) amounted to 11.3 % (11.7 %). Net earnings for the year rose by 16.3 % to € 358 million (€ 307 million) and earnings per share to € 1.73 (€ 1.48). This positive development is also reflected in the recommended dividend of € 0.55 per share.
2004/05 was not only a good year for financial figures, but was also a year in which the group prepared for the recommendations to change the EU sugar market regulation. We have used this foreseeable change to concentrate our efforts even more on the structures, opportunities and challenges of our markets. Thanks to its strengths and resources, our group is in a position to successfully counter the pressures imposed on it. For example, we again systematically reviewed business processes at all our domestic and foreign group companies for further improvements and continued implementation of our long-term efficiency improvement program at all sugar factories. These measures contributed towards enabling us to defend our position in a difficult market and help secure employment. This program is supported by a group-wide human resources strategy of encouraging and intensifying co-operation in the personnel
26
area across borders and entities. A further and decisive positive competitive advantage for the Südzucker Group is the close co-operation with its sugar beet suppliers. We have already proved in the past that we possess the creativity, solidarity and dynamism to grow and work profitably despite difficult conditions.
The major framework for sugar activities within the EU is the sugar market regulation, which has been in place for more than 30 years. This has led to a fair balance of interests between consumers and producers, as foreseen in the Treaties of Rome and the current draft of the EU constitution. It is now taken for granted that the supply of sugar is provided by domestic production. Sugar is a low-cost food, the sugar intervention price has been stable for more than 20 years and, viewed internationally, is low in comparison to purchasing power.
As a result of the sugar market regulation, farmers receive a fair and foreseeable revenue stream from their sugar beet. Structural change is not hindered, as shown by the increase in the area of sugar beet under cultivation per farm and the rise in quantities processed per factory due to the concentration of factory locations. Sugar production in the EU has the world’s highest environmental and quality standards, and employment complies with EU social standards. Sugar processors are competitive on world markets with their products, as EU sugar is made available for export at world market prices, with export refunds provided by farmers and the sugar industry.
27
Foreword by the executive board
The developing countries, least-developed countries (LDCs) and countries from the African, Caribbean and Pacific economic area (ACP countries) are included in the EU sugar market regulation with fixed import rights at guaranteed and fair prices.
Although the existing sugar market regulation ensures a functioning EU sugar market, it is currently being questioned by the EU commission. We acknowledge the need for a debate on the future of the sugar market regulation. As part of its recommendations made in July 2004, the commission has expressed its intention to set out a long-term perspective for efficient production in the EU. We welcome this intention, as it confirms our strategy for the sugar segment of concentrating on the best European sugar beet growing areas. However, when making its recommendations, the commission is called upon to implement its intentions to achieve this objective.
We see the continued inclusion of all import quantities in the future quota system recommended by the commission as a basic condition for achieving this objective. Imports must have a balanced relationship to domestic production. The demand for regulated import quantities at guaranteed prices for LDCs is supported not only by NGOs (non-governmental organisations), but above all by the LDCs themselves.
28
Major framework conditions also include taking a responsible position in the current WTO negotiations, in other words ensuring protection against grey imports and a long-term expiry period for export recoveries. The WTO negotiation partners hope to achieve agreement on an agricultural treaty by the conclusion of their conference in Hong Kong at the end of 2005.
After the appellate body, the WTO appeals board, supported the panel against EU sugar export policies in all significant points, we expect the EU to make every effort to optimize implementation of the export opportunities for sugar provided by the WTO.
Sugar production cannot be maintained at current volumes in all the regions of Europe. We thus expect a fair solution based on the principles of the sugar market regulation. A voluntary exit from sugar production must be a real alternative for the less competitive regions within the EU. Restructuring costs and capital expenditures in alternatives must be provided, with appropriate measures taken to encourage these changes. We accept a price reduction in the range of the first step recommended by the commission in July 2004, as long as the funds thus made available can be used for a limited period of time to finance the restructuring needed.
29
Foreword by the executive board
Farmers, employees and entities are jointly appealing for this concept to be implemented. In Germany, the Co-operative of German Beet Farmers Associations (ADR), the German Farmers Association (DBV), the Food and Catering Union (NGG) and the Economic Sugar Union (WVZ) have joined forces to establish a “keep sugar” initiative, intended to point out the dangers to Germany as a sugar-producing country of overdoing the reform of the sugar market regulation.
The commission has announced that it will submit specific recommendations on continuing the sugar market regulation on 22 June 2005.
Already in 2004/05, discussion of the sugar market regulation was not without influence on events in the EU sugar market. Südzucker Group is prepared for a more difficult market situation and has optimised its own marketing organisation throughout the group to meet varying customer demands, aiming to improve its competitive position by particularly concentrating on customer-tailored service and quality.
We have again planned to do much in 2005/06. Despite the difficult position, it is our aim to improve the company’s value on behalf of our shareholders on a lasting basis, whereby innovation and capital expenditures, particularly in new products and markets, education and training, all contribute. We aim to achieve
30
our objectives for earnings and growth by maintaining a high degree of flexibility, including constantly developing and reviewing our portfolio and activities.
The executive board wishes to thank you, our shareholders, for the trust that you have given us in 2004/05 and we will use all our efforts to ensure that this trust continues to be justified in the future.
Your sincerely,
Südzucker AG Mannheim/Ochsenfurt The executive board
31
Group financial statements, results of operations, financial position and net assets
Operating profit was marked by a sound performance
Group results
in the special products segment and a rise in profi-
Revenues Operating profit Operating margin ROCE Capital expenditures in tangible assets Investments in financial assets Employees
2004/05
2003/04
4,827 523 10.8 11.3 500 590 17,494
4,575 479 10.5 11.7 307 181 17,973
D million D million % % D million D million
tability at the eastern European sugar companies. An improvement of 7.7 % in the sugar segment, from € 335 million to € 360 million, was again exceeded by profit increases in the special products segment. The latter was able to boost operating profits by 12.5 %, from € 144 million to € 163 million. Operating margin (operating profit as a percentage of revenues) could be improved from 10.5 % in 2003/04 to 10.8 % in 2004/05 for the group as a whole.
Group revenues and profits Südzucker Group revenues rose by € 252 million, or
The increase in operating profit in the sugar segment
5.5 % in 2004/05, to € 4,827 million (€ 4,575 million).
was due to the positive performance of the eastern
Operating profit grew over-proportionately by 9.2 %,
European sugar entities. Admission to the EU of the
or € 44 million, from € 479 million in 2003/04 to
eastern European EU candidate states, in which
€ 523 million, the highest-ever profits for the
Südzucker, with a sugar quota share of 24 %, is more
Südzucker Group.
strongly represented than in the original EU 15, led to a sharp increase in profitability. Indeed, the eastern
Growth of 3.6 % in revenues for the sugar segment,
European companies achieved a better operating
from € 3,395 million to € 3,518 million, was primarily
margin than the entities in the EU 15. The inclusion
due to positive developments in eastern Europe, where
for the whole year of Šląska Spółka Cukrowa holding
EU expansion on 1 May 2004 led to an expected sharp
company, in which nine Silesian sugar factories are
rise in revenues, from € 373 million to € 562 million.
combined (2003/04: nine months), boosted this posi-
On the other hand, in the EU 15 area there was a decrease in revenues of some 2.2 %. This was due to low sugar production during the 2003 campaign, whereby less sugar was available for export in 2004/05. Further negative factors were price pressure and a reduction in mixed feed and molasses revenues.
Change in revenues in D billion 1995/96 1996/97
3.9 4.2
In the special products segment, the climb in re-
1997/98
venues continued with an increase of € 129 million,
1998/99
4.5
or 11.0 %, from € 1,180 million to € 1,309 million.
1999/2000
4.5
About half this increase in turnover was due to
2000/01
4.7
continuing growth in the functional food, Freiberger
2001/02
4.8
and starch divisions. Sales growth in the special
2002/03
products segment was boosted by the integration of
2003/04
Steirerobst (nine months for 2004/05) and Stateside (only six months in 2003/04).
32
3.8
2004/05
4.4 4.6 4.8
tive performance still further. Results of the German,
million to € 13 million. A significant reason for this
Belgium, French and Austrian sugar companies were
was the lack of restructuring expenses, caused in the
negatively affected by price reductions, particularly
previous year by the closure of sugar factories in Bel-
for exports of quota sugar to countries outside the
gium and Poland as well as by Südzucker’s part-time
EU, lower C-sugar contributions to profitability and
early retirement program. Further special income
higher energy and coking coal costs.
arose from the successful placing of a package of Fresenius shares and the sale of the remaining 10 %
A double-digit profit increase of 12.5 %, to € 163
shareholding in KWS Saat AG. On the other hand,
million, was recorded by the special products segment.
there were charges arising from pellets which could
Eliminating the special effects of changing Freiberger’s
not be used as animal feed.
financial year in 2003/04, this segment’s growth would be even stronger. The main driver of this expansion
Financial results deteriorated from net expense of
continues to be the functional food division, with
€ 53 million in 2003/04 to net expense of € 79 million
strongly above-average growth rates. Normalisation
in 2004/05. This was due to the increase in net interest
of raw materials costs led to a clear improvement in
expense as a result of substantial capital expenditures.
profitability in the starch division.
Financial results include income totalling € 16 million from the Atys Group, stated at equity for the first
At 11.3 %, return on capital employed (ROCE), or
time, and from Eastern Sugar.
operating profit as a percentage of capital employed, remained almost at the same level as in 2003/04
Earnings before income taxes amounted to € 458
(11.7 %), due to improved profitability offset by more
million and were thus € 64 million, or 16.2 %, above
capital employed.
the € 394 million achieved in 2003/04. The group’s effective income tax rate could be maintained at 21.7 %
As operating profit restructuring costs and other
(21.9 %). This was partly due to the Austrian corpo-
special items could also be improved as well, by € 46
ration tax reform, leading to a reduction in corporation tax rates from 34 % to 25 %. Furthermore, income tax rates are some 19 % in the eastern European EU countries. With taxes on income amounting to € 99
Change in operating profit
million (€ 86 million), net earnings after tax for
in D million 1995/96 1996/97 1997/98 1998/99 1999/2000 2000/01 2001/02 2002/03 2003/04 2004/05
2004/05 amounted to € 358 million, or 16.6 % higher
242
than the € 307 million achieved in 2003/04. Südzucker
259
shareholders’ share of these net earnings amounted
279
to € 298 million, 17.1 % more than in 2003/04. This amounts to net earnings per share of € 1.73, com-
308
pared with € 1.48 in 2003/04.
329 392
Cash flow statement
465 520
2004/05 was marked by capital expenditures on tangible assets of € 500 million, € 193 million higher
479 523
than the € 307 million expenditures in 2003/04. A major part of this expenditure was the construction
33
Group financial statements, results of operations, financial position and net assets
within one year of a bioethanol production plant at
Group. The increase of € 261 million in intangible
Zeitz, with a total capital expenditure volume of some
assets is primarily due to the acquisition of 14.2 %
€ 200 million. Capital expenditures in expanding Iso-
of Raffinerie Tirlemontoise.
malt production capacity at Offstein continued. The growing demand for Raftiline®/Raftilose® products
Shareholders’ equity rose by € 352 million, from
has been reflected by the construction of a second
€ 2,386 million on 29 February 2004 to € 2,738 million
ORAFTI production plant in Chile.
at 28 February 2005. Increases due to net earnings for the year of € 358 million and capital increases
Südzucker used the opportunity to acquire 14.2 % of
of € 248 million were partly offset by dividend pay-
the shares in Raffinerie Tirlemontoise from institutio-
ments of € 102 million and a decrease in minority
nal investors for € 368 million. Overall, the holding
interest due to the acquisition of 14.2 % of Raffinerie
in R.T./SLS Group was increased to 99.6 %, with 0.4 %
Tirlemontoise S.A.. The ratio of shareholders’ equity
of the shares held by Belgian sugar beet farmers.
to total liabilities and shareholders’ equity of 38.0 %
Together with the increase in holdings of Atys,
and the ratio of net financial debt to shareholders’
Steirerobst and the acquisition of Wink, € 590 million
equity of 61.1 % underline the group’s sound financing
was invested in financial assets.
ratios. € 1,216 million of net financial debt is financed long-term by debentures and convertible bonds.
Total capital expenditures of € 1,090 million were primarily financed by shareholders’ equity, on the one
Recommendation on appropriation of profits
hand from increased operating cash flow of € 550
The executive board and supervisory board will
million (€ 522 million) and on the other hand by
recommend a dividend of € 0.55 per share to the
capital increases at AGRANA and Z+S Holding AG in
annual general meeting on 28 July 2005. With share
February 2005, from which proceeds of € 248 million
capital of € 174.8 million entitled to dividends, the
increased group equity.
amount distributed will be € 96.1 million. The dividend will be paid on 29 July 2005.
The remainder was financed by current and noncurrent third-party funds. After considering the effects of changes in working capital, group companies included in the consolidated financial statements for the first time and dividend payments, net third-party debt amounted to € 1,672 million (€ 1,100 million).
D million 1995/96 1996/97 1997/98
410 437 480
Balance sheet
1998/99
464
Südzucker Group’s total assets increased by € 1,157
1999/2000
472
million, or 19.2 %, to € 7,195 million (€ 6,038 million).
2000/01
This increase was significantly influenced by capital
2001/02
expenditures in bioethanol and expanding Palatinit
2002/03
and ORAFTI capacity. For financial assets, the increase
2003/04
was mainly due to the expansion of the fruit group,
2004/05
with an uplift to 50 % in the investment in Atys
34
Gross cash flow from operating activities
498 551 580 522 550
Risk report
Südzucker uses an integrated system for the timely
Operating risk controlling is implemented by the ope-
identification and monitoring of specific risks for the
rating controlling department. The executive board is
group. A successful treatment of risks is based on
kept continuously informed via an extensive reporting
achieving an appropriate balance of opportunities and
system and, if relevant, by ad hoc reports.
risks. The company’s risk culture is marked by encouraging risk-awareness, setting clear responsibilities,
Internal monitoring system/internal audit
independence in risk controlling, adequate supervision
The group’s internal audit department carries out its
by management and implementing internal controls.
control functions at the parent company and group companies and reports to the executive board. It
The risk management system is an integrated part of
checks and evaluates the security, financial viability
the entire budgeting, monitoring and reporting process
and correctness of business processes, together with
for all relevant subsidiaries and is based on the syste-
the effectiveness of the internal control system.
matic identification, evaluation, control and documentation of risks.
Early warning system to determine risks endangering the company as a going concern
Südzucker Group’s risk management system
The possible effects of international and national
Südzucker Group’s risk management system is based
trade agreements and market regulations are already
on risk controlling at operating level and on strategic
analysed at an early stage and assessed as part of the
controlling of investments, an internal monitoring
risk management system.
system used by the group internal audit department, and an early warning system for determining risks
The future structure of the EU sugar market regulation
endangering the existence of the group as a going
is of particular importance to the Südzucker Group.
concern. The reform of the sugar market regulation continues Strategic controlling of investments and risk
to be the subject of controversial discussion. Discussi-
controlling at operating level
ons within the council of agricultural ministers have
The main thrust of strategic controlling of investments
clearly shown that the EU commission cannot find a
is strategic planning at segment and business division
majority in favour of the recommendation it passed
levels. Significant developments influencing the busi-
to the council of ministers in July 2004. Ten EU mem-
ness are recorded and assessed. Opportunities and
ber states from countries in southern, northern and
risks are considered based on market and competitive
eastern Europe, whose sugar economy is endangered
analyses, and these form the basis for management
by the reform, have informed the agricultural com-
decisions.
missioner, appointed on 23 November 2004, that they reject the recommendations.
Investment controlling also supervises the achievement of business objectives and monitors group
Negotiations are currently progressing at the current
companies using uniform key ratios. It evaluates the
Doha round on specific modalities for agricultural
investment portfolio with the aim of optimising the
reform. The objective is to achieve agreement before
investment structure, and provides assistance with
the next WTO summit meeting in Hong Kong in
acquisitions and disposals.
December 2005.
35
Risk report
On 28 April 2005, the appellate body, the WTO’s
Interest rate change risks for money market interest,
appeals committee, confirmed the results of the WTO
mainly resulting from liquidity fluctuations due to the
panel finding against the EU’s sugar policy in 2004.
campaign, or existing or planned floating rate loans.
This will result in a decrease in EU sugar production. The extent and timing are decisively dependent on
Foreign currency risks mainly arising from sugar
specific implementation recommendations to be
sales on the global market in US dollars as well as
made by the EU.
payment obligations in foreign currencies.
The commission recommendations and political dis-
Product price risks arising from world sugar market
cussions over the past few months have shown that
price fluctuations and price fluctuations in the energy
there is a political will within the EU to strengthen the
sector.
competitiveness of beet sugar production and to offer a sustained perspective for efficient producers. This
Normal market instruments such as interest rate swaps,
confirms our strategy of concentrating on the best
interest caps, interest futures and foreign currency
sugar beet production areas. The EU commission is
futures are used to hedge these risks. Use of these
called upon to design its legislative recommendations
instruments is regulated as part of the risk manage-
and to defend them in international negotiations in
ment system by group guidelines, which set limits
order to achieve its declared objectives.
based on the underlying transactions, define authorisation procedures, forbid the use of derivative finan-
The EU commission has announced that it wishes to
cial instruments for speculative purposes, minimise
present legislative recommendations to reform the
credit risks and regulate the internal reporting system
sugar market regulation on 22 June 2005. It is thus
and segregation of duties. Compliance with these
to be reckoned that the changes in the market regu-
guidelines and the proper processing and valuation
lation will be fully effective following a transitional
of transactions are regularly checked by persons other
phase. Südzucker will use this transitional phase to
than those involved in the transactions.
undertake those measures required to maintain the sugar segment’s earnings power.
Standards have been developed to monitor risks arising from matters relating to product quality and
The executive board has determined no other matters
safety, which are checked by carrying out continuous
which could endanger the group’s existence as a
controls. These steps are primarily carried out as part
going concern.
of the quality control program.
Südzucker is subject to market risks arising from changes
The integration of quality management, safety at
in foreign exchange rates, interest rates and equity
work and environmental management establishes
share prices, and, to a limited extent, uses derivatives
optimal conditions for identifying risks timely and for
to hedge risks arising from operating activities and
implementing steps to minimise risk.
planned funding needs for capital expenditures. Südzucker Group mainly hedges against the following risks:
36
Events after the balance sheet date
Outlook
On 3 March 2005 AGRANA acquired a further 6 % of
Profitability in the sugar segment will again be nega-
the shares in Atys Group, France and increased its
tively affected by unsatisfactory price developments
investment in the world-wide fruit additives company
for exports, particularly to countries outside the EU,
to 56 %. Atys will be fully consolidated in 2005/06.
in 2005/06. We estimate that there will be a reasonable declassification by the EU commission for the 2005 campaign, which will lead to relief for the market and the overall price situation. Growth in revenues and operating profit in the special products segment will continue in 2005/06. Significant contributions to results will be achieved from the inclusion of Atys in the AGRANA fruit group. With the commencement of bioethanol production in early 2005, Südzucker will play a major role in the growth market of biological fuels as the largest German producer of ethanol. The profitability of the special products segment will benefit from this as the year progresses.
37
se e d s to
38
nourish
markets
THE SEEDS: 700,000 t of wheat a year is the main source of raw material for our bioethanol, a new opportunity to plant 100,000 hectares of land. THE MARKETS: We supply an annual 260,000 m3 of bioethanol to the oil industry. Bioethanol use in Germany is in the starting blocks. Brazil shows its potential. 39
Sugar segment
Market developments Global market The global sugar market price moved satisfactorily in the course of 2004/05 and could recover the decrease it suffered in the previous year. In particular prices in US dollars rose on white sugar markets over the twelve months by US$ 60 per tonne, or 29 %, from some US$ 205 per tonne to US$ 265 per tonne. Due to the continuing weakness of the US dollar prises in euros were lower and only increased by € 35 per tonne,
Big Bags with sugar for the global market.
or 21 %, from € 165 per tonne to € 200 per tonne. The higher prices were due to at first cautious, but
ethanol production, rather than producing sugar. More
then more and more downward adjustments of seve-
than 50 % of cane sugar was processed to alcohol in
ral million tonnes to global production estimates
the past year. Brazil intends to increase its 30 % global
made by an increasing number of market observers.
market share of raw and white sugar still further. 34
Both India and the EU recorded significantly worse
new mills will be built to meet this objective. Brazil
harvests than in previous years. The 2003 harvest was
already has 50 % of the global market share of raw
the second worst in the past 15 years and had a
sugar exports, compared with 7 % only ten years ago.
knock-on effect on 2004.
A similar development can also be noted for white sugar exports. Its market share of 19 % in 1994 has been continually expanded to 25 % today. This coun-
Global market sugar prices
try thus now has a greater role in white sugar exports
March 2002 to March 2005
than the EU, which had been market leader for many
London, white sugar, in US$/tonne, nearest forward trading month
years. Following one of its most successful years, the Brazilian sugar and alcohol industry intends to increase
250
its cane sugar harvest by 180 million tonnes, or 55 %, 250
from 330 million tonnes in 2004/05 to 510 million tonnes by 2009.
200
There was a further decline of 1.9 million tonnes in
150 March 2002
Sept. 2002
March Sept. 2003 2003
March 2004
Sept. 2004
March 2005
global sugar inventories in 2003/04, from 70.1 million tonnes to 68.2 million tonnes. This inventory reduction was favoured by an increase of some 2.5 % in global sugar consumption.
As a result of the rise in oil prices and political
40
moves to encourage biological fuels, such as those
Latest estimates for the 2004/05 campaign show a
made in the EU, ethanol demand, and hence ethanol
plus of 2.5 million tonnes compared with the pre-
production, is increasing world-wide. In particular
vious year, with production of 146 million tonnes of
the large cane-sugar producing countries such as
sugar. Based on previous rates of consumption this
Brazil have assigned at least part of their cane sugar to
could lead a slight surplus. Some analysts are cur-
rently expecting significantly lower production and
The EU lifted its import ban on sugar from Serbia
estimate a global deficit which could lie between 3
and Montenegro, which had been in force for 15
and 5 million tonnes. Thus it is possible to be cau-
months, on 22 July 2004. Preferential market
tiously optimistic with respect to further price impro-
access for sugar from Serbia was re-implemented
vements.
as from 7 August 2004; in the meantime, customsfree import quotas totalling 193,000 tonnes of sugar have been fixed for these countries. Bilateral negotiations with Croatia are required. The commission’s calculation of available recovery budget NA I goods for the 2004/05 budget year (1 October 2004 – 30 September 2005) determined that existing funds were adequate for the expanded EU. Hence, the particularly active processing market has not yet been affected. On the recommendation of the EU commission, in autumn 2004 it was agreed despite our express appeal that there would be no declassification of quotas for the current 2004/05 sugar year. This decision proved to be in error, so that the commission estimates a quota sugar excess of 0.7 million tonnes for 2004/05. Furthermore, when tendering export licences, only those with high deductions to recovery rates were issued. The overall situation on the market has led to various sugar companies, including Raffinerie Tirlemontoise and the Südzucker
European Union
sugar companies in Poland, using the intervention
Ten new member states joined the EU on 1 May 2004.
for the first time since its introduction in 1968.
The transitional measures agreed were substantially
We expect a reasonable declassification for the
implemented. The sugar market was negatively
2005/06 sugar year, which will relieve the market
affected by the lack of declassification.
and lead to lower prices.
Entry negotiations between the EU and Romania
A base production levy of 2 % on A- and B-sugar
and Bulgaria in the agricultural area have mean-
(€ 12.638 per tonne of sugar) and an additional
while been completed. Romania received a quota of
levy on B-sugar of 27.050 % (€ 170.929 per tonne
109,164 tonnes for sugar from beet, 329,636 tonnes
of sugar) was fixed for the 2003/04 sugar year.
for sugar from imported raw sugar and 9,981 tonnes of iso-glucose, Bulgaria received a production quota of 203,500 tonnes sugar, of which 198,749 tonnes are from refining imported raw sugar.
41
Sugar segment
Performance of the divisions
EU 25 The area of sugar beet under cultivation for Südzucker
Overview
companies in the EU 25 was 479,600 hectares
The figures for the sugar segment relate to Südzucker
(477,800 hectares). However, the increase in beet
AG, Südzucker International, Raffinerie Tirlemontoise,
harvested was much sharper, growing to 30.6 million
Saint Louis Sucre and AGRANA. The segment also in-
tonnes (26.3 million tonnes). Sugar production rose
cludes the agricultural and animal feed divisions. For
to 4.74 million tonnes (4.11 million tonnes) due to a
ease of comparison, the figures for the campaign and
high sugar yield of 9.9 tonnes per hectare (8.6 tonnes
sales quantities for the past financial year are divided
per hectare).
into EU 25, EU 15, new EU member states and other countries.
EU 15 The area of beet under cultivation for the companies in the EU 15 remained unchanged from the previous
Key figures for the sugar segment
year at 361,400 hectares (361,400 hectares), whereby the beet harvest increased to 25.2 million tonnes 2004/05
2003/04
Revenues
D million
3,518
3,395
Operating profit
D million
360
335
Operating margin
%
10.2
9.9
ROCE
%
10.3
10.3
Capital expenditures in tangible assets
D million
144
206
Investments in financial assets
D million
473
109
12,001
13,812
Employees
(21.6 million tonnes) and the sugar yield to 10.8 tonnes per hectare (9.4 tonnes per hectare). This resulted in a sugar production from beet of 3.89 million tonnes (3.39 million tonnes). In Germany, the area of sugar beet under cultivation in 2004 for Südzucker AG increased slightly to
Beet processing
1,000 t
31.0
26.7
174,400 hectares (172,000 hectares) due to a minor
Sugar production
1,000 t
5.1
4.4
expansion of the area under cultivation in regions in which only low beet yields could be achieved in the previous year due lack of rain.
Sugar production from beet and refining
The sugar beet was sown under good soil and weather conditions, which remained optimal during the initial
Group
growing phase. In the west, beet plants suffered in
The total area of sugar beet under cultivation for the
June and July from lack of rainfall and the remaining
Südzucker Group in 2004/05 was 495,200 hectares
significant lack of water in the sub-soil from the winter
(498,800 hectares). With an average of 9.7 tonnes per
months. However, sufficient rainfall in August also led
hectare (8.4 tonnes per hectare) the sugar yield was
to good growing conditions in this region. The beet
sharply higher than for the previous year. In total,
plants showed a high level of concentration, at some
4.80 million tonnes (4.17 million tonnes) of sugar were processed from 31.1 million tonnes (26.7 million tonnes) of sugar beet and, including the refinery of raw sugar,
Group beet processing
sugar production within the group reached 5.13 million
in million tonnes
tonnes (4.44 million tonnes). The higher sugar beet
2002/03
quantities and closure of seven factories (one in Bel-
2003/04
gium, six in Poland) led to a campaign lasting 91 days
2004/05
(75 days) and thus to better plant utilisation.
42
29.7 26.7 31.1
90,000 plants per hectare and, due to beneficial
on 12 September 2004, 0.96 million tonnes (0.89 mil-
weather conditions, yields were also above-average
lion tonnes) of sugar were processed from 6.6 million
in October.
tonnes (6.2 million tonnes) of beet. Sugar production, including refining, totalled 1.11 million tonnes (1.04
1.81 million tonnes (1.44 million tonnes) of sugar
million tonnes).
were produced from 11.5 million tonnes (8.9 million tonnes) of beet with a sugar yield of 10.4 tonnes per
At AGRANA, Austria the area under cultivation rose
hectare (8.3 tonnes per hectare). The campaign started
by 3 % to 44,700 hectares (43,200 hectares). In the
at the Zeitz and Brottewitz works on 16 September 2004.
early growing phase some crops, which were resistant
The campaign lasted between 79 days in Regensburg
to the pesticides normally used in the country, were
and 107 days in Brottewitz, with an average duration
damaged by beetle. However, growing conditions were
of 92 days (74 days).
good overall so that, with a sugar yield of 10.2 tonnes per hectare (8.9 tonnes per hectare), sharply higher
The generally good campaign was severely affected
production levels could be achieved than in the pre-
as from the beginning of November 2004 by the dis-
vious year. 0.46 million tonnes (0.39 million tonnes)
covery for the first time of minute traces of animal
of sugar were produced from 2.9 million tonnes (2.5
parts during the official examination of beet molasses
million tonnes) of beet in the 76 days (68 days) of
pellets. In agreement with the supervisory authorities,
the campaign.
extensive control measures were carried out on delivery of beet molasses pellets, pressed pellets and beet parts.
New EU member states The area of beet under cultivation for Südzucker
At Raffinerie Tirlemontoise in Belgium sowing and the
companies in the new member states which joined
initial growing phase of sugar beet plants were made
the EU in 2004 rose to 118,200 hectares (116,500
under perfect conditions, leading to a high concen-
hectares). The amount of beet harvested increased
tration of 92,000 plants per hectare. Due to good
even further, to 5.4 million tonnes (4.7 million tonnes)
growing conditions, the sugar yield was 11.2 tonnes
and the sugar yield was 7.2 tonnes per hectare (6.2
per hectare (11.1 tonnes per hectare) on the 58,700
tonnes per hectare). A total of 0.86 million tonnes
hectares (60,600 hectares) under cultivation. The beet
(0.72 million tonnes) of sugar was produced.
harvest of 4.2 million tonnes (4.0 million tonnes) began on 17 September 2004 and the campaign lasted 101
The area of beet under cultivation at Südzucker Inter-
days (79 days) to yield 0.66 million tonnes of sugar
national in Poland decreased by 3.7 % to 70,000 hec-
(0.67 tonnes of sugar).
tares (72,700 hectares). With adequate moisture levels, the beet plants grew quickly, plant concentration rea-
At Saint Louis Sucre, France the area of sugar beet
ched 85,000–90,000 plants per hectare, and the sugar
under cultivation declined by 2 % to 83,500 hectares
yield was higher than in the previous year at 7.4 tonnes
(85,600 hectares). Beet plants grew well at Saint Louis
per hectare (6.7 tonnes per hectare). Overall, 0.52 mil-
Sucre due to the extremely beneficial sowing and
lion tonnes (0.49 million tonnes) of sugar were pro-
early growing conditions. The average plant concen-
cessed in the 84 (66) campaign days from 3.2 million
tration was 100,000 per hectare. Sufficient moisture
tonnes (3.1 million tonnes) of beet.
and warmth ensured good growth conditions during the entire vegetation phase. The sugar yield was 11.5
AGRANA International increased the area under
tonnes per hectare (10.4 tonnes per hectare). During
cultivation in Hungary by 27 % to 23,500 hectares
the 100 day (91 day) campaign, which commenced
(18,600 hectares) in 2004 to meet its quotas. With an
43
Sugar segment
average number of plants at 75,000 per hectare the
Other countries
sugar harvest was 6.8 tonnes per hectare (4.7 per
The area of beet under cultivation for Südzucker
hectare). The 1.1 million tonnes (0.6 million tonnes)
International in Moldova rose by 11 % compared with
of beet harvested were processed in 95 days (53 days)
the previous year to 15,600 hectares (14,100 hecta-
to 0.16 million tonnes (0.09 million tonnes) of sugar.
res). With plant concentration of 71,000 per hectare,
In The Czech Republic the area of beet under cultiva-
sugar yields were 3.7 tonnes per hectare (2.7 tonnes
tion declined by 7 %, to 14,000 hectares (15,100 hec-
per hectare), considerably higher than the previous
tares). With a plant concentration of 95,000 per hec-
year. 0.06 million tonnes (0.04 million tonnes) of sugar
tare the sugar yield was 8.0 tonnes per hectare (6.7
were processed in 57 (41) campaign days from 0.5
tonnes per hectare). 0.11 million tonnes (0.10 million
million tonnes (0.3 million tonnes) of beet.
tonnes) of sugar were produced from the beet harvest of 0.7 million tonnes (0.6 million tonnes) in 84 days
No sugar beet was planted for AGRANA International
(82 days). In Slovakia the area of beet under cultivation
in Romania in 2004. 0.18 million tonnes (0.13 million
increased by 6 % to 10,700 hectares (10,100 hectares).
tonnes) of sugar were produced from refining.
With some 85,000 beet plants per hectare, the sugar yield was 6.0 tonnes per hectare (4.8 tonnes per hectare) and, in a 102 day (73 day) campaign, 0.06 million tonnes (0.05 million tonnes) of sugar were processed from 0.5 million tonnes (0.3 million tonnes) of beet.
Active transponder –
the 2004 campaign. Transponders are electronic
new identification system
data media which are already used in many areas,
for beet deliveries
from marking goods in retail stores to identifying individuals at factories. The active transponder can be read and input electronically at distances of up to 100 meters. Thus, when the beet is loaded on the field, the beet farmer’s data can be transferred from the loader to the truck without the driver getting out. The data can then be read electronically on the weighing station in the beet yard. The active transponder thus represents a significant contribution to safety during the beet transportation process. As an improvement over the barcode card, the
44
Previously, barcodes were used to identify
transponder also permits additional information,
beet transported to sugar factories. An active
such as origin and time of loading, to be recorded
transponder was used for the first time at the
timely and thus facilitates the audit trail of beet
Rain factory to identify beet traffic during
deliveries back to the field.
Sugar sales volumes
exports, both for quantity and value. In order to adhere to these self-imposed limits, the EU commission can
Group
use declassification to make flexible adjustments to
The most significant event in the past year was the
quotas. The lack of declassification in September 2004,
expansion of the European Union by ten member sta-
due to a mistaken estimate by the EU, led to supply
tes. The Südzucker Group was involved early in the
pressures.
most important beet-growing countries, Poland, The Czech Republic, Slovakia and Hungary, and achieved a
For the current financial year we expect declassification
quota share of 24 %, whereby Poland is of the greatest
of 1.5 million tonnes of sugar in September 2005,
importance with respect to sugar production.
which will give considerable relief to the market.
The introduction of the sugar market regulation with
The consolidated total sales volumes for all group
its guaranteed intervention price, so successfully used
companies amounted to 4,689,600 tonnes (4,746,000
in the EU countries, initially led to insecurity in the
tonnes) of sugar in 2004/05, almost at the same level
new member states. Price levels increased overnight,
as for the previous year. This is due on the one hand
leading to a reduction in purchases in the first few
to a decline of 2.2 % in domestic sales compared
months of EU membership. The EU took measures to
with the previous year and, on the other hand, to an
prevent inventory building at former, lower prices, in
increase of 1.3 % in exports.
order to counter speculation, but such measures were not rigorously enforced.
EU 25 Total sales volumes of EU group companies in
Despite a relatively smooth merger of these markets,
2004/05 were 4,430,200 tonnes (4,526,300 tonnes)
price differences between the old and new EU mem-
of sugar, a decline of 2.1 % over the previous year.
ber states led to problems. It was not only prices that
Sales quantity decreases of 3.8 % in Germany and
were different, but also quality, both absolutely and
of 3.2 % in the EU were only offset by a 1.9 % in-
relative to the consistency of individual quality para-
crease in exports to countries outside the EU.
meters. This also applies to supplier services, such as just-in-time or short-term deliveries and delivery
EU 15
guarantees, upon which our customers have based
Sales quantities of the EU 15 companies reached
their own logistics processes for many years. Hence,
3,819,700 tonnes (3,868,100 tonnes) of sugar in
our customers are prepared to pay a bonus for such
2004/05.
services. Our competitors attempt to minimise these quality deficiencies or compensate for them by offe-
Südzucker AG’s sales quantities fell by 7.8 % to
ring lower prices. In this price/quality environment a
1,564,600 tonnes (1,696,600 tonnes) of sugar due to
new market differentiation will emerge, with our cu-
a decline in exports as a result of the reduction in
stomers using very varied quality strategies.
quantities available. Domestic sales quantities almost reached the same level as for the previous year, where-
The reduction in quotas (declassification), which was
by exports had to be reduced by 25 % due to the lower
not made in September 2004, also had a negative
production in 2003, and quantities delivered within
effect on sugar exports. The GATT obligations made
the EU were also lower than for the previous year.
by the EU limit the opportunity of using quota sugar
45
Sugar segment
The good domestic results are primarily due to the
On the other hand, sales quantities to the alcohol-free
increase in quantities delivered to the retail food in-
drinks, milk products and bakeries sectors declined.
dustry. On the other hand, deliveries to the sugar processing industry were lower than quantities for
Sales quantities at Saint Louis Sucre, France were 1.5 %
the previous year. This is primarily due to sales to the
higher than for the previous year at 1,063,200 tonnes
alcohol-free drinks industry, which could not repeat
(1,047,000 tonnes) of sugar. Domestic sales quantities
the high levels achieved in previous year, when sales
fell by 4.8 %, whereby sales quantities to food retailers
of drinks were excellent during the unusually hot
decreased by 2.8 % and to the sugar processing industry
summer of 2003. Slight declines in the chocolate
by 5.9 % compared with the previous year. Sales
and sugar-based goods sectors were partly offset
quantities within the EU were also down, whereas
by increased sales quantities to the milk processing
exports to other countries rose by 15.9 %.
industry. Sales quantities at AGRANA, Austria were 14.1 % In the food retail sector, investments in the Inter-
lower than for 2003/04 at 387,500 tonnes (451,300
national Food Standard (IFS), a uniform supplier certi-
tonnes) of sugar, due to lack of available supplies.
fication concept, are now paying off. IFS certification
Sales quantities were down both domestically and for
is a seal of quality which, amongst other things, helps
exports whereby, on the other hand, EU deliveries
to differentiate us from cheap imports from neigh-
were the same as for the previous year. Domestic sales
bouring eastern European countries. Expenditures
quantities were 8.8 % down on 2003/04, with retail
made to enable customer demands to be precisely
sales almost at the same level as the previous year
met, as well as other services, have also given us a
and deliveries to the processing industry considerably
competitive advantage. We will retain this advantage
lower than in 2003/04, down by 11.6 %. This was
by taking further measures in future.
particularly due to a decrease in sales to the food and chemicals industries. Furthermore, the domestic market
The trend towards own-label brands remains un-
has been confronted since autumn 2004 with massive
checked, including for sugar, and is making ever
deliveries from the new EU member states, in particular
greater inroads into all retail marketing channels.
The Czech Republic and Slovakia.
Südzucker is countering this trend by innovative product designs, particularly in the special products area.
New EU member states
A historic record level of sales quantities could be
The companies in the countries which joined the EU on
achieved for preserving sugar, due to the good fruit
1 May 2004 suffered a decrease of 7 % in sales quanti-
harvest in southern Germany.
ties to 610,500 tonnes (658,200 tonnes) of sugar. Domestic sales quantities were some 9 % lower than for the
Overall sales quantities at Raffinerie Tirlemontoise,
previous year, partly due to joining the EU and related
Belgium were 804,400 tonnes (673,200 tonnes) of
problems.
sugar in 2004/05, up 19.5 % from the previous year. This growth results primarily from exports. Increases
Cukier Królewski (Poland) suffered a decline of 10 %
in domestic sales quantities compare with a decrease
in sugar sales quantities to 344,900 tonnes (383,300
in the EU area. Sales quantities to food retailers were
tonnes) of sugar in 2004/05. Domestic sales quanti-
at the same level as the previous year, whereas sales
ties were some 4 % lower than for the previous year
quantities to the sugar processing industry increased
due to problems associated with joining the EU in the
by 1.6 %. This was due equally to special factors and
period from May to July 2004.
higher sales quantities to the chocolate industry.
46
AGRANA Czech Republic achieved total sales of 97,500 tonnes (101,900 tonnes) of sugar, down by some 4 %. Domestic sales quantities fell by some 10.6 %, also influenced by EU membership. AGRANA, Slovakia, recorded total sales of 45,400 tonnes (59,500 tonnes) of sugar in 2004/05, a fall of some 24 % over the previous year. Domestic sales quantities decreased by some 34 % due to joining the EU. AGRANA Hungary was able to increase total sales quantities by some 8 %, to 122,700 tonnes (113,500 tonnes) of sugar. Sharply higher exports more than compensated for a 15 % decline in domestic sales. Other countries The east European sugar companies outside the EU recorded total sales of 259,400 tonnes (227,300 tonnes) of sugar, an increase of 14 % in 2004/05. With higher domestic sales quantities of some 19 %, exports declined significantly. AGRANA Romania achieved total sales of 210,100 tonnes (177,500 tonnes) of sugar, some 18 % higher than for the previous year. This positive development is above all due to increased domestic sales, with exports being of no significant importance. Südzucker Moldova recorded total sales quantities of 49,300 tonnes (49,800 tonnes) of sugar and thus almost achieved the previous year’s level. Whereas domestic sales quantities developed very positively, increasing by 23.2 % despite considerable market pressures, exports fell back significantly.
47
Sugar segment
Agriculture
Examination of beet molasses by the Irish authorities in October 2004 determined traces of animal parts, or
The beneficial weather conditions in 2004 brought
bone fragments. A subsequent, more extensive research
good corn and extremely good sugar beet yields, to-
into the origins of these parts revealed that they had
gether with satisfactory quality.
entered the animal feed via field topsoil. Sales of beet pellets were negatively affected by these findings.
Research, experimentation and advice, traditionally carried out by the agriculture division, were concen-
The law does not permit feed to contain any animal
trated on nitrogen-based fertilisers in 2004. The
proteins. Without appropriate analytical methods, this
research into area-based farming methods, which
means that finding any traces of animal parts leads
has been carried out for the past ten years, was wide-
to the goods no longer being marketable as animal
ly put into practice. The measured use of nitrogen-
feed. There is zero tolerance for such findings. This
based fertilisers, depending on plant concentration
rule entered into force when it was necessary to take
and soil culture, leads to a constant rate of plant
every possible step to avoid the transfer of BSE carriers
growth and maximum corn quality with a minimal
within the food chain. The presence of animal parts
use of fertilizers. Planting advice and research activi-
in feedstock, originating from the topsoil and arising
ties in the agriculture division were also undertaken
from natural causes, was not considered in the law.
in connection with the ORAFTI project in Chile.
The Federal Institute of Risk Evaluation (BfR) in a statement dated 10 January 2005 stated “As a result
The restructuring of Agrar- und Umwelt AG, Loberaue
of the analyses, there is no risk that food derived from
in Zschortau, has meanwhile been completed and a
agricultural animals, particularly ruminants, as a result
second biological turkey feeding plant commenced
of their being fed sugar beet pellets contaminated with
operations in 2004.
animal remains, will be infected with BSE”. It can be assumed that the authorities will develop a solution which takes appropriate account of the results of this
Animal feed
examination.
Molasses pulp and molasses pulp pellets
Beet molasses
Due to the good beet harvest in 2004, some 22 %
Beet molasses production was slightly higher than
more beet pellets were produced throughout the group
for the previous year, at over 1 million tonnes for the
than in the previous year. At the beginning of the past
group. Cane molasses prices increased sharply from
financial year, market prices tended to be extremely
early 2004 due the poor sugar cane harvest in some
strong due to the low production of beet pellets in
countries in the Far East and higher ethanol produc-
2003, but came under pressure in the summer due to
tion in Pakistan. In Germany, Austria, Poland, France
sharply falling prices for competitive products and
and Belgium, market prices were the same as for the
high harvest expectations, above all for corn.
previous year, whereby in other eastern European countries, above all in Slovakia and The Czech Republic,
Revenues in Belgium and Poland were higher than for
the market was negatively affected by an over-supply
the previous year, whereby in other countries those
of molasses. Molasses production in 2004 has been
companies within the Südzucker Group producing dried
almost entirely sold within the group. The major cus-
pellets did not achieve quite the same price levels as
tomer in eastern Europe is the alcohol industry, where-
in the previous year, due to market weakness.
by in the west the yeast industry dominates, followed by the mixed-feed industry.
48
Bodengesundheitsdienst GmbH
REKO Erdenvertrieb GmbH
20 years of international research in
REKO Erdenvertrieb GmbH provides high-value com-
the EUF co-operative
post and substrate soil from foliage and beet soil at
Plant nutrients in soil are examined using the electro-
Regensburg since 1989 and at Plattling for the past
ultra-filtration (EUF) method. Optimal fertilisation
5 years. Hence, these raw materials are naturally re-
quantities are determined for plants and this is of
cycled. The product range of various composts is
major importance in optimising the economic and,
rounded off by marketing bark-based products for
at the same time, environmentally-friendly and sus-
gardens and landscape gardeners.
tainable, agricultural use of the land. In 1985 Süddeutsche Zucker-AG, Zuckerfabrik Franken and the
Revenues from sales of soil rose to € 1.6 million
Austria sugar industry pooled their EUF research work
(€ 1.4 million), despite the continuing recession in the
in an EUF co-operative to support the fertility and
construction sector, due to an improved range of
health of soil. This research has been carried out by
services such as, for example, extending the product
Südzucker AG, AGRANA Zucker and Stärke AG and
range, customer-friendly opening times and the pro-
Raffinerie Tirlemontoise S.A. since 1993. The EUF co-
duction of individual substrate mixes. Marketing of
operative currently carries out a number of projects
compost soil to local soil works could be further ex-
covering soil examination and fertilisation advice. A
tended.
total of 17 dissertations provide evidence of the importance of the EUF soil examination work, and eight
In addition to serving its existing customers, REKO
dissertations were supported by the EUF co-operative.
is actively establishing further sales channels and
Currently, a dissertation is being prepared on the im-
activities.
portance of extractable organic carbon using electroultra-filtration for determining optimal nitrogen fertilisation for sugar beet. The demands of agriculture and
Eastern Sugar
politics in the areas of soil examination and fertilisation advice will also require further development of
Eastern Sugar B.V., in which Südzucker has an invest-
this research area in future.
ment of almost 50 % via Saint Louis Sucre and which is included in the consolidated financial statements
The EU directive on cross compliance in the national
at equity, has a maximum quota of some 281,000
“Ordinance on the principles for maintaining agricul-
tonnes. In the past campaign, Eastern Sugar produ-
tural areas in a good agricultural and ecological con-
ced some 355,000 tonnes of sugar at a total of five
dition” has focussed attention on the importance of
sugar factories in Hungary, Slovakia and The Czech
humus for agricultural soil. Bodengesundheitsdienst
Republic. The company showed a satisfactory increase
has already been involved extensively with the humus
in revenues and profitability in the past year.
content of agricultural areas. The humus content of more than 18,000 agricultural soils in southern Germany has been measured; almost all the soils (98 %) with a clay content of 13 % achieved the minimum value of 1.5 % humus content.
49
fu e l to
50
move
the
future
THE FUEL: Bioethanol, an environmentally-friendly fuel, can be added to gasoline, processed to ETBE, the octane enhancer, or used on its own to power engines. THE FUTURE: Flexible fuel vehicles, already manufactured by some carmakers today, run on up to 85 % bioethanol.
51
Special products segment
on the market with carbohydrates which are either
Overview
slowly or only partly metabolised and thus lead to a The special products segment includes the ORAFTI/
lower increase in blood sugar and insulin. Isomalt from
Palatinit, starch, PortionPack, Surafti and Freiberger
Palatinit possesses related nutritional physiological
divisions as well as the fruit and bioethanol activities.
and sensory properties and is thus exceptionally well suited as an additive for these products.
Key figures for the special products segment The ORAFTI Group successfully operates in the food Revenues Operating profit Operating margin ROCE Capital expenditures in tangible assets Investments in financial assets Employees
D million D million % % D million D million
2004/05
2003/04
1,309 163 12.4 14.3 356 117 5,493
1,180 144 12.2 17.2 101 72 4,161
ingredients division with nutritional-specific and functional products prepared on a chicory basis as well as rice ingredients and syrups on a fructose basis. ORAFTI was also able to progress further with its chicory-based inulin products in 2004/05, despite increased competition on the market. Market penetration could be significantly increased in the active food ingredients division (inulin and oligofructose for nutrition). Nutritional trends such as
Performance of the divisions
“healthy snacks“ or “lower glycemic effects“, but also increased pressure on the food industry to place
ORAFTI/Palatinit
more weight on healthy aspects in its products, have
Palatinit GmbH was able to continue its dynamic
boosted interest in Raftiline® and Raftilose®. This
growth in 2004/05 with Isomalt, the sugar substitute.
has resulted in many new products, including brands,
All leading confectionery producers, whether in Japan,
with Raftiline® or Raftilose® as additives being brought
South America, the USA or Europe, have confectionery
to market by the larger food companies. This trend is
containing Isomalt in their product range, as sugar-
supported by the results of new nutritional science
free candy and chewing gum, which are traditionally
studies of Raftilose® Synergy1. It has been proven
strong market segments for Isomalt, continue to
that daily intake of this product strengthens minera-
record satisfactory growth globally. The continuing
lisation in bones and has a positive effect on the
demand for Isomalt confirms our strategy of laying
immune system.
the foundations for further growth through investment in product development, application technology,
Construction of a new plant to process chicory to
market research and nutritional physiology.
inulin was started in Chile; work is progressing according to plan. The largest harvest to date could be
Against expectations, the ‘low carb’ trend observed in
processed at the chicory factory in Oreye, Belgium,
the USA in the first half of 2004 was not further taken
as farmers achieved a record yield.
up by the market. On the other hand, the trend towards food with low glycemic effects, increasingly
The liquid sweeteners division was again successful
supported by nutritional science, is having an effect
on the market with its fructose-based, customer-
on the market. Many products have been launched
tailored products despite the unfavourable summer weather for sales volumes.
52
A breakthrough on the market could be achieved by
Potatoes and corn from biological farms are also
the Bio-Based Chemicals division. The first customers
processed to biological starch at the Gmünd and
are starting to use Inutec® active surface materials.
Aschach factories. Biological sugar-based products
A number of new applications were successfully
and biological potato-based products are processed.
launched for the health care and personal care sectors,
The major sales markets for these products are the
giving a sound perspective for further growth.
EU, Switzerland, North America and south-east Asia. AGRANA has a leading position in Europe for biolo-
Despite increased competition, particularly from
gical starch products from potato and corn.
Asia, and negative foreign currency rates, Remy Industries has also achieved growth with its rice-
AGRANA is also the major supplier of GM-free, corn-
based food additives. New customers were gained,
based starch products to the food industry and baby-
using rice-based starch and flour in their products.
food producers, using domestic starches, sourced
Investments to increase capacity and improve pro-
starches, malt-based dextrose and dry-glucose syrups.
duct quality will also lead to additional growth in the coming year.
Total sales quantities of starch and supplementary products could be increased by 3.5 % compared with the previous year, to 331,700 tonnes (320,300
Starch
tonnes) in 2004/05. Revenues increased by 12 %
AGRANA has responsibility for Südzucker Group’s
due to our successful special product strategy.
corn- and potato-based starch operations. Hungrana, the Hungarian corn-based starch and In Austria 204,000 tonnes (149,500 tonnes) of starch-
isoglucose factory, in which AGRANA holds 50 %,
industry potatoes were processed in the past year,
processed 357,700 tonnes (408,000 tonnes) of corn.
yielding 47,900 tonnes (31,800 tonnes) of potato-
Hungrana has a EU market share of 27 % in isoglu-
based starch. Due to the above-average starch con-
cose, with 137,000 tonnes. Hungrana produced
tent, the EU potato starch quota of 47,691 tonnes
22,000 m3 of bioethanol, and an expansion to
was fully utilised.
50,000 m3 is planned to meet the growing market for this fuel additive.
23,200 tonnes (29,200 tonnes) of food-industry potatoes were used, also with an higher starch
In Romania 21,100 tonnes (13,400 tonnes) of corn
content, for the production of potato-based dried
were processed to corn-based starch and glucose at
products (mashed potato and ready-made mixed
the Romanian corn-based starch factory S.C. A.G.F.D.
products).
Tandarei. Demand by the processing industry for starch-based products has increased sharply due to
281,000 tonnes (280,900 tonnes) of corn were pro-
the economic recovery in Romania. Furthermore,
cessed at the corn starch factory at Aschach. The
Tandarei could also show a sharp increase in market
corn starch factory in Hörbranz, Vorarlberg, with a
share and now holds one-third of the market for
daily process capacity of 100 tonnes of corn, was
home-grown corn-based starch and glucose.
closed at the end of February 2005 and production was moved to the Aschach plant, with 1,000 tonnes daily processing capacity.
53
Special products segment
PortionPack Europe
The group’s strategy, with its substantial indepen-
PortionPack Europe Group specialises in portion
dence from brand name articles, was successful in
packs for the catering and wholesaler sectors and
the past year and led to overall satisfactory opera-
has a leading position in Europe. In this market, which
ting results. The group’s market position in Germany
is subject to increasing price pressures from low-
was maintained despite a difficult overall economic
priced eastern European suppliers and new procure-
environment, and exports could be improved.
ment technologies such as internet auctions, the decisive competitive advantage lies in low costs.
With modern production facilities at the head office
This group of companies, which has grown rapidly
in Berlin, in Muggensturm in Baden, in Austria and
over the past few years, could almost maintain re-
Great Britain as well as further sales outlets in France
venues at € 112 million (€ 114 million) in a difficult
and Poland, Freiberger is well-positioned throughout
market environment and improved its operating
Europe to rigorously use its existing growth potential
profit.
in an expanded EU in the future.
Surafti
Fruit
The Surafti Group produces and sells fondants and
In 2003, the Südzucker Group began establishing a
other sugar-based special products to the European
fruit-juice concentrate and fruit additives division
bakery industry. Existing, mature structures have
via AGRANA. Existing experience of agricultural
been more efficiently designed in order to remain
raw materials and campaign operations within the
competitive. Revenues could be well maintained in
group, nutritional/technological know-how, a cus-
2004/05 at € 98 million (€ 97 million).
tomer base overlapping that of our core businesses and knowledge of central and eastern European
Freiberger
markets, all form an excellent basis for the future
Freiberger Group, allocated to the special products
success of this division. The fruit division has con-
segment, produces deep-frozen and chilled pizzas,
siderably strengthened Südzucker Group’s special
deep-frozen pastas and baguette-based meals and
products segment.
is the EU’s largest deep-frozen pizza manufacturer, with a market share of some 20 %.
Activities are concentrated on fruit additives and fruit-juice concentrates in the business-to-business
The success of the Freiberger Group is based on
area. Fruit additives are mainly produced from fruit,
efficient production and a high degree of flexibility
sugar and texturisers. Major customers are dairies,
in meeting specific product requirements from the
the bakeries industry and ice cream producers. Fruit-
retail, catering and social welfare industries. The
juice concentrates are mainly based on juice from
differentiation of its product range compared with
apples and berries. Both the market for fruit additives
competitors is based on a large number of recipes,
and the market for fruit-juice concentrates show a
covering not only classical areas but also specialities
positive growth trend.
for seasonal, regional and ethnic markets. Further-
54
more, its range of services is extended to cover
The expansion of the new division is proceeding as
many customer-oriented services, including quality
planned. The Danish concentrate producer Vallø Saft
and logistics management.
A/S was 100 % acquired in 2003/04.
A majority holding has meanwhile been acquired in
The fruit division is made up of Atys, including
Steirerobst AG, the Austrian fruit additives and con-
Dirafrost, Vallø Saft, Steiererobst and Wink with
centrates producer. The company, with revenues of
currently 37 production locations, of which 14 are
€ 120 million, has been included in the consolidated
outside Europe. Due to the limited shelf life of fruit
financial statements since the second quarter of
additives and close co-operation with customers in
2004/05. Steirerobst will start operations in the
developing recipes and application technology,
Moscow area in mid-2005 with a new fruit additives
production is geographically close to sales markets.
factory, the first in Russia, thus establishing in another
On the other hand, fruit-juice concentrate factories
growth market.
are located in the European fruit growing areas.
The cornerstone of the fruit division is the French
The fruit division achieved revenues of some € 630
Atys Group, with an annual production volume of
million in 2004/05 (based on a pro forma calculation
300,000 tonnes and revenues of some € 400 million,
of all companies). Of this amount, some € 520 million
making it the global market leader in fruit additives
relates to fruit additives and € 110 million to fruit-
for the dairy industry. The acquisition is being made
juice concentrate. Global market share amounts to
in steps, with 25 % acquired in July 2004, another
some 37 % for fruit additives (dairies, bakeries and
25 % in December 2004 and a further 6 % in March
ice cream) and some 9 % for fruit-juice concentra-
2005, so that AGRANA now holds a majority of 56 %.
tes (apple and berries juice).
As part of the agreed acquisition steps, all shares will be acquired by AGRANA by December 2006.
The considerable synergy potential within the previously separate operating units is currently being
By purchasing the Belgium company Dirafrost at
realised. This includes global sourcing, best practice
the end of September 2004, Atys has acquired a
concepts in production, marketing and logistics, as
specialist supplier of deep-frozen fruits and fruit pu-
well as joint research and development activities.
rées with production in Belgium, Serbia and Morocco, 487 employees and sales of some € 49 million. In January 2005, Atys also started operations at a new fruit additives factory in Centerville, Tennessee. In order to further strengthen the fruit-juice concentrates division, the Wink Group, Bingen was acquired in January 2005. Wink has 200 staff, turnover of almost € 40 million and production facilities in Hungary, Poland and Romania, making it one of the largest producers of fruit-juice concentrates in Europe. With this acquisition, the concentrates division has advanced to a leading position throughout Europe.
55
Special products segment
Bioethanol As from the beginning of 2004, biological fuels, including in mixed fuels, were exempted from mineral oil tax in Germany for the period from 1 January 2004 to 31 December 2009. The required political and economic stage was thus set for developing a market for biological-based fuels. As a result, Südzucker has considerably expanded the group’s bioethanol activities which, to date, have been based on a plant attached to the Eppeville sugar factory in France and on a joint venture in Hungary. At the beginning of February 2004 the foundation stone was laid for a state-of-the-art plant at Zeitz, Saxony-Anhalt. Production and product marketing is made via Südzucker Bioethanol GmbH using the new CropEnergies brand name. The plant, which is planned to process an annual 700,000 tonnes of wheat, will reach its full daily capacity of some 760 m3 of bioethanol in autumn 2005 and can produce more than 260,000 m3 ethanol annually for marketing to the oil and petrochemicals industry. Furthermore, some 260,000 tonnes of the high-value protein feedstock DDGS (distillers dried grains with solubles) will be produced, to be sold primarily to the mixedfeed industry under the ProtiGrain® brand name. In addition, an annual 30,000 megawatts of electricity will be fed into the national grid. The market is growing. We assume that planned sales quantities will be reached in the current financial year, as many plants are being converted from production of the methanol-based fuel additive MTBE to ethanolbased ETBE. In addition, the oil industry is beginning to offer fuels with ethanol as an additive. Impressions of the bioethanol plant at Zeitz.
56
The market for energy from renewable raw materials will grow sharply throughout Europe in the next few years. In connection with the commitment to reduce greenhouse gases made in the Kyoto protocol, the EU has called on all member states to take appropriate measures. The objectives of the EU’s biological fuel directive were to increase the share of biological-based fuels in total fuel consumption to 5.75 % by 2010. This converts to an EU-wide market volume for bioethanol as a fuel additive of between 8 and 10 million m3. Furthermore, the objective set out in the commission’s green book entitled “towards a European strategy for securing energy supplies”, is to have a 20 % substitution of conventional fuels by alternative fuels for road traffic by 2020. Hence, the conditions for production of bioethanol are also changing outside Germany. In Austria, for example, an additives ordinance has been issued, requiring the oil industry to mix 2.5 % biologicalbased fuels to petrol by October 2005 and 5.75 % by 2008. An amendment to the mineral oil tax law contains a tax benefit from October 2007 if at least 4.4 % biological-based fuel additives are reached. Based on these facts, we are reviewing commencement of bioethanol production via AGRANA in Austria. We are also tracking developments in France, Belgium and Hungary.
Personnel
Südzucker Group employed an average of 17,494
ple, training, health protection, working conditions,
(17,973) staff world-wide during 2004/05. The
human rights, etc., which are illustrated by some
change is mainly due to a decline in the number of
50 best-practice examples.
employees in Poland following the restructuring program carried out there, and strong growth in the
In future, the European works council will also have
fruit division.
representatives from those eastern European states in which Südzucker Group operates. The training of young people remains of great im-
Number of employees Annual average
Sugar segment Special products segment Total
portance to Südzucker. In addition to the continuing 2004/05
2003/04
12,001
13,812
5,493
4,161
17,494
17,973
high-quality apprenticeship program, many opportunities in the form of projects and practical work are given to school children and students to prepare for their working lives and receive guidance as to their future jobs.
The personnel development function assists in
Südzucker AG’s employee recommendation system
integration into the group. An international on-
continues to generate cost savings. The number of
boarding program has been launched, in which staff
recommendations for improvements, as well as the
from different group companies who have been
average savings per recommendation, grew sharply.
employed with the group for between two and four years are brought together to share experience and
Health protection and safety at work are major the-
information about Südzucker Group’s strategies
mes at all companies within the Südzucker Group.
across boundaries and divisions. Integration and a
Ideas are developed and implemented jointly with
feeling of togetherness are encouraged and matters
our highly motivated and committed employees.
of concern throughout the group can be processed better and more efficiently.
Of key concern are preventative measures, achieved by means of a large number of improvements to
At the same time, common foundations are laid and
work processes and the working environment. There
assistance given for implementing processes. Lear-
is also an intensive exchange of know-how between
ning English, the group’s language, is encouraged in
group companies including, for example, passing on
many ways and is the basis for cross-border work
best practice solutions. The success of this concept
programs.
is demonstrated by the number of accidents as well as the number days of absence due to accidents,
At European level a code of behaviour drawn up in
both of which could be further reduced within the
2004 between the European Association of Catering
group.
Unions (EFFAT) and the Sugar Industry Association
58
(CEFS) could be further developed. The code empha-
We should like to thank all our staff for their efforts
sises the social responsibility of companies within
and involvement in 2004/05. We also thank the
the European sugar industry. On a voluntary basis, it
members of the works councils for their co-opera-
covers eight minimum standards such as, for exam-
tion and fairness.
Research and development
Main activities
Sugar and special products
The main areas of research and development for the
Sugar
Südzucker Group include developing new products
Electroporation is a process to ease the extraction
and product variances, optimising production
of sugar from beet. The laboratory-based experi-
processes and supporting marketing and business
ments to process beet juice using electroporation
development activities.
and, thereafter, alkaline extraction, commenced during the 2002 campaign and were continued in
The range of work covers agricultural production,
2004, confirming the excellent technological pellet
developments relating to the sugar, fruit additives,
quality achieved by effective temperature control.
starch, inulin and ethanol divisions and their end-
This could lead to significant primary energy savings
products (such as special sugar varieties and products,
in the pellet drying process. Furthermore, it will be
sugar substitutes and other functional carbohydrates),
possible to operate existing extraction plant at a
through to applications in the food, feed and non-
considerably higher degree of efficiency and hence
food areas. Activities include product and process
avoid new capital expenditures in the extraction area.
development, process optimisation, product safety, application technology, analytical consulting,
Parallel work has also demonstrated the applicability
nutritional science and patents.
of electroporation to other fields of interest to Südzucker, such as inulin, starch and fruit-juice extrac-
These tasks are carried out by some 250 staff at
tion. Further patent registrations to secure the rights
five group locations. National and international
are in process.
co-operation with universities and research institutes supplement the group’s own work in some fields of
Special products
research. The total budget for research and devel-
In the fondant division, the range of glazings was
opment amounted to some € 27 million (€ 26 million)
expanded and new, tailor-made solutions developed
in 2004/05.
for customers.
A major effort has been made to expanding patent
Developments in the caramel syrups area led to new
registrations for all products, particularly in the
varieties of flan additives for the southern European
special products division and for sugar-related
market, as well as special applications in the bake-
technological processes. A total of nine new patents
ries division.
were registered. An active patent policy is an important part of our corporate strategy, and hence
Aroma-based sugar cubes are developed for the Bel-
of the research and development strategy. In the
gium market under the “Momenti” brand. Laborato-
product safety area, the existing system for the
ry-based tests of various flavours were made and an
sugar, special varieties, product development and
optimum production process was designed. Four fla-
animal feed divisions was further developed and
vours, chocolate, amaretto, Irish cream and praline,
extended to cover the whole group.
were launched on the market. A product with a combination of sugar and dried fruit, nuts and chocolate was developed under the “Ti´Breakfast” name and will be launched on the market in 2005.
59
Research and development
Functional carbohydrates
Inulin Inulin is extracted from chicory root and is primarily
Isomalt/Isomaltulose/Palatinose®
covered by the functional food division, although
Isomalt is a sugar substitute developed by Südzucker
non-food products are also gaining in importance.
and produced from sugar as a raw material. In order to meet the needs of customers, particularly A new technology was developed for the hydrogenation
in the fruit additives division, a new, highly soluble
process, enabeling process capacity to be improved.
inulin (Raftiline® HSI), based on enzymatic hydrolysis, is being developed. Furthermore, pilot trials to blend
Advice given to Isomalt customers in the major appli-
chicory-based products have been commenced in or-
cation areas of hard-boiled candies and coated
der to develop products to be used mainly in animal
chewing gums was directed in particular at measure-
feed.
ment methods to optimise the quality of customertailored products, and new launches. We believe that
The scaling-up of the Inutec® surfactants process to
this will also enable us to open further promising
ton-scale was continued on. A liquid form of our inulin-
marketing opportunities in the bakeries, soft caramels
based surfactants was also developed, with a new,
and confectionery areas.
alternative esterification process increasing extraction and yield.
As part of the product launch of Palatinose®, a new sweetener with a low glycemic index and produced
The range of use for surface-active inulin-based
from sucrose, we progressed in securing the product
materials in recipes for care products was expanded.
by patent registrations, particularly in the drinks sector
Their application in emulsion polymerisation technology
and for some special confectionery-related applications.
and as a dispersant for stabilisation in paint, inks and coatings has proved positive. Furthermore, it was
The main area of nutritional research for Isomalt/
shown that, using high-pressure homogenisation, this
Isomaltulose was concentrated on further confirming
material can also be used for the manufacture and
stated product qualities relating to their low glycemic
stabilisation of highly-specialised emulsions, such
effects. The starting point is the fact that there is a
as nano-emulsions.
global increase in diabetes diseases and their precursors. The market demand for diabetes products,
Further research on the use of fructans from chicory
such as the low carb segment, is growing accordingly.
in nutrients confirms their expected effects, especially
In addition to short-term studies, long-term studies
for the patent-pending Raftiline® Synergy1. A broadly-
are being carried out with diabetics at renowned
based, long-term study with children shows that the
universities to confirm earlier tests. The results are
use of Synergy1 increases calcium intake within a
promising. Isomalt and Isomaltulose can also success-
short period of time, and that this has a positive effect
fully help reduce glycemics in special forms of nu-
for at least one year or longer and is accompanied by a
trients.
sharp increase in bone mineralisation.
The pre-biotic properties of Isomalt have also been confirmed by further studies.
60
Furthermore, it was shown that Synergy1 increases
New carbohydrates
magnesium and calcium absorbtion by older women. In the new carbohydrates area, activities were conIn addition, two further studies confirmed the prebiotic
centrated particularly on resistant starch (neo-amy-
effect of Synergy1 on older people, and the prebiotic
lose, see inset). Further research was concentrated
effect of oligofructose (Raftilose® P95), causing a
on products with cholesterol-reducing or anti-in-
positive influence on the wellness of babies, was
fection effects, with medical studies carried out and
demonstrated.
production technologies developed. Further ideas relating to intestinal health are being worked on,
Work in the animal feed area revealed, for Raftifeed®
and these studies are partly being carried out in
IPE, that use of a higher dose in feed during the
co-operation with German, European other research
weaning phase combined with a lower subsequent
institutions.
dosage, is the ideal way of optimising nutritional and economic benefits.
Starch Starch from corn and potatoes is produced by the
Two types of long-chain inulins in UHT milk drinks
Südzucker Group for the food and non-food areas.
were studied for recrystallisation and precipitation during shelf-live. The newly-developed inulin product
In 2004/05, application of starch to a completely
Raftiline® HPX is less soluble, but showed slower
new area was achieved. We were able to develop
recrystallisation, making it a recommended product
modified starches which can be used in dispersion
for UHT milk drinks.
paints. These starch-based products show a gelling performance which were previously only found in cellulose derivatives or synthetic polymers. Furthermore, new and special derivatives and application technologies were optimised, making use of these starch-based products even more attractive. In addition to finding new applications for starch as a renewable raw material, potential economic benefits were of primary interest in carrying out this work. In connection with the expansion of business activities in the fruit-juice concentrate and fruit additives areas, a technology was developed at pilot level to permit starch to be steamed and spray-dried at the same time. Products manufactured using this technology show a considerably improved application profile when producing fruit additives, with new and improved textural properties of the end-products.
61
Research and development
Capital expenditures
With its high level of capital expenditures, the New production process for amylose,
Südzucker Group paves the way for expanding its
a starch component
business activities and lays the foundations for further success in the coming years.
Südzucker is developing a new process to manufacture amylose (neo-amylose), which
€ 499 million (€ 307 million) was invested in proper-
overcomes the disadvantages of previous
ty, plant and equipment by the group in 2004/05,
production process. Due to neo-amylose’s
whereby the emphasis was moved from capital ex-
unique structure and processing properties
penditures in the sugar segment of € 144 million
for micro-particles, thermoplasts, gels and
(€ 206 million) to the special products segment at
resistant starch, this opens up a broad range
€ 356 million (€ 101 million).
of interesting application opportunities, such as in cosmetics, pharmaceuticals, foils,
Sugar segment
films and healthy nutrients. A broad patent
Returns on past capital expenditures in Germany
portfolio has secured Südzucker’s rights to
already met expectations during the 2004 campaign.
this new technology.
In particular, expansion of the vaporisation stations at the Offstein and Offenau works led to significant
Raw material for the Neo-amylose process is
energy savings. Following a test phase at the Ochsen-
sucrose (sugar). With the help of an enzyme
furt and Groß-Gerau works, the beet yard automa-
developed by Südzucker sucrose is split and
tion system was successfully introduced at the Rain
converted to polymerised neo-amylose. The
works (see page 44).
enzyme used, amylosucrase, is of natural origin and is produced with fermentation technology,
The emphasis of capital expenditures at Raffinerie
isolated and cleaned in a number of processing
Tirlemontoise, Belgium lay in energy savings, with
steps. Using existing technologies available
the aim of reducing energy requirements by 17 %
within the group (fermentation, enzyme re-
by 2005. Two heat exchangers entered operations at
action, starch technology) neo-amylose, the
the Wanze and Tienen works. A new control centre
resulting product, provides a further use for a
was established and crystallisation automated at the
renewable raw material (sucrose) and thus a
Brugelette factory. Capital expenditures at Tienen in
new, forward-looking element in Südzucker’s
the varieties production area were made as part of
research strategy.
the “best-pack program“ to implement International Food Standards (IFS), ensuring adherence to quality and hygiene standards and improving the plant’s efficiency. Capital expenditures at Saint Louis Sucre, France were concentrated above all on optimising production structures and prolonging the useful life of the
62
plant by means of longer syrup production campaigns. For this reason, two syrup tanks were constructed at the Guignicourt and Roye factories. With the installation of a small packaging machine for Tetrapacks at the Eppeville works, a packaging innovation was implemented to strengthen sales of our end-products.
Constructing a tank at Offstein.
At AGRANA, Austria, capital expenditures were mainly aimed at optimising production and improving plant efficiency. A program extending over a number of years was completed with the renewal of the process control system for the sugar house in Tulln.
Heat exchanger at Longchamps.
Special products segment Construction of the bioethanol plant at Zeitz was the largest single project in the special products segment. The plant, working in conjunction with the neighbouring sugar factory, has an annual capacity
Beet juice tanks at Offstein.
of 260,000 m3 of bioethanol and, in its conception and dimension, is a state-of-the-art plant for Europe. Operations commenced as planned on a stepby-step basis during spring 2005. Further capital expenditures were made in the ORAFTI/Palatinit division with the construction of a
Expanding the cooling tower at Leopoldsdorf.
factory in Chile to supplement the existing ORAFTI production facilities in Belgium, and expansion of capacity of the Palatinit plant at Offstein. Capital expenditures in the fruit division managed by AGRANA served to optimise the cost and production structures of this dynamically growing business
Building the ORAFTI factory in Chile.
division.
Bioethanol plant at Zeitz.
63
Low e r
e m i s s to
64
i ons brighten
the
future
EMISSIONS: A Munich Technical University study shows that our plant in Zeitz alone can help to reduce CO2 emissions by 520,000 t annually. OUTLOOK: Ecologically sound and economically promising: Experts estimate that bioethanol's market share will more than double by 2010. And rising oil prices may help to boost the pace still further. 65
Consolidated financial statements Balance sheet 28 February 2005 (D million) ASSETS Note
28.02.2005
29.02.2004
Intangible assets
(6)
1,687.6
1,426.5
Property, plant and equipment
(7)
2,076.7
1,664.6
Financial assets
(8)
329.6
267.8
4.8
5.5
13.0
18.2
4,111.7
3,382.6
(9)
1,954.4
1,645.3
Trade and other receivables
(10)
856.8
704.2
Cash and cash equivalents
(11)
272.0
305.6
Current assets
3,083.2
2,655.1
Total ASSETS
7,194.9
6,037.7
28.02.2005
29.02.2004
Subscribed capital
174.8
174.8
Capital reserves
951.3
951.3
Revenue reserves
1,065.3
851.0
Equity attributable to shareholders of Südzucker AG
2,191.4
1,977.1
546.2
408.8
Receivables and other assets Deferred tax assets
(28)
Non-current assets Inventories
LIABILITIES AND SHAREHOLDERS' EQUITY Note
Minority interest Shareholders' equity
(12)
2,737.6
2,385.9
Provision for pensions
(13)
393.0
379.1
Deferred tax liabilities
(28)
330.2
333.0
Other provisions
(14)
200.3
222.6
Non-current financial liabilities
(15)
1,215.7
1,079.6
Other liabilities
(15)
23.5
24.9
2,162.7
2,039.2
Total non-current provisions and liabilities
66
Other provisions
(14)
409.6
415.4
Current financial liabilities
(15)
728.6
325.9
Trade and other payables
(15)
1,156.4
871.3
Total current provisions and liabilities
2,294.6
1,612.6
Total LIABILITIES AND SHAREHOLDERS' EQUITY
7,194.9
6,037.7
Income statement 1 March 2004 to 28 February 2005 (D million)
Note
01.03.2004 –28.02.2005
01.03.2003 –29.02.2004
Revenues
(19)
4,826.6
4,575.0
Change in work in progress and finished goods inventories and internal costs capitalised
(20)
175.7
39.8
Other operating income
(21)
97.1
93.4
Cost of materials
(22)
(3,053.5)
(2,824.2)
Personnel expenses
(23)
(585.1)
(564.6)
Depreciation
(24)
(201.0)
(198.1)
Other operating expenses
(25)
(737.0)
(642.3)
522.8
479.0
13.4
(32.6)
536.2
446.4
Operating profit Restructuring costs and special items
(26)
Operating profit after special items Interest expense, net
(27)
(94.4)
(72.2)
Income from investments
(27)
15.6
19.4
457.4
393.6
(99.9)
(86.3)
Net earnings for the year
357.5
307.3
of which attributable to Südzucker AG shareholders
297.4
254.6
of which attributable to minority interest
60.1
52.7
Earnings per share (I/share)
1.73
1.48
Earnings before income taxes Taxes on income
(28)
67
Consolidated financial statements Statement of cash flows 1 March 2004 to 28 February 2005 (D million) Note
2004/05
2003/04
357.5
307.3
210.7
229.8
Write-ups of non-current assets
(5.5)
(1.1)
Decrease (–) / increase (+) in non-current provisions
(1.1)
2.4
(11.4)
(16.2)
Gross cash flow from operating activities
550.2
522.2
Gain on disposals of items included in non-current assets
(39.9)
(20.8)
(32.4)
(3.8)
Increase in inventories, receivables and other assets
(316.5)
(152.3)
Increase (+) / decrease (-) in liabilities (excluding financial liabilities)
238.8
(32.3)
Change in working capital
(110.1)
(188.4)
Net cash flow from operating activities
400.2
313.0
79.5
211.9
(6), (7)
(499.8)
(306.6)
(8)
(590.0)
(181.0)
11.1
5.5
(999.2)
(270.2)
248.0
14.4
(102.3)
(127.2)
0.0
250.0
414.7
(310.6)
Cash flow from financing activities
560.4
(173.4)
Change in cash and cash equivalents
(38.6)
(130.6)
5.0
8.7
Net earnings for the year Depreciation of non-current assets
(24)
Other income (–) not affecting cash
Decrease in current provisions
Cash received on disposals of items included in non-current assets Capital expenditures: Property, plant and equipment and intangible assets Financial assets, including acquisitions of consolidated subsidiaries Increase in cash as a result of changes in companies consolidated Cash flow from investing activities Capital increases
(12)
Dividends paid Bonds issued Receipt (+) / repayment (–) of financial liabilities
Effect of exchange rate changes and valuation changes (IAS 39)
68
Cash and cash equivalents at the beginning of the year
(11)
305.6
427.5
Cash and cash equivalents at the end of the year
(11)
272.0
305.6
of which: cash
110.5
201.1
of which: securities
161.5
104.5
Changes in shareholders’ equity (D million)
Balance at 01.03.2003
Subscribed capital
Capital reserves
Other revenue reserves
174.8
938.3
730.4
Fair Accumulated value foreign currency reserve translation differences (8.0)
(10.3)
Total revenue reserves
Equity of Südzucker shareholders
Equity of minority interest
Total equity
712.1
1,825.2
395.8
2,221.0
Net earnings for the year
254.6
254.6
254.6
52.7
307.3
Distributions
(87.4)
(87.4)
(87.4)
(39.8)
(127.2)
13.0
1.5
14.5
(6.9)
(6.9)
(2.2)
(9.1)
(21.4)
(21.4)
0.8
(20.6)
Capital increase
13.0
Exchange rate changes
(6.9)
Other changes
(35.7)
14.3
Balance at 29.02.2004
174.8
951.3
861.9
6.3
(17.2)
851.0
1,977.1
408.8
2,385.9
Balance at 01.03.2004
174.8
951.3
861.9
6.3
(17.2)
851.0
1,977.1
408.8
2,385.9
Net earnings for the year
297.4
297.4
297.4
60.1
357.5
Distributions
(87.4)
(87.4)
(87.4)
(14.9)
(102.3)
248.0
248.0
Capital increase Exchange rate changes
26.1
Other changes Balance at 28.02.2005
174.8
951.3
(10.1)
(11.7)
1,061.8
(5.4)
8.9
26.1
26.1
7.9
34.0
(21.8)
(21.8)
(163.7)
(185.5)
1,065.3
2,191.4
546.2
2,737.6
69
Consolidated financial statements
Segment reporting (D million) 1. Business segments
Total segments Revenues Operating profit Operating margin Segment assets Segment liabilities Capital employed Return on capital employed Capital expenditures on property, plant and equipment Investments in financial assets Depreciation of property, plant and equipment Employees
2004/05 Sugar
Special products
Total segments
2003/04 Sugar
Special products
4,826.6 522.8 10.8 % 6,211.7 2,100.4 4,645.8 11.3 %
3,517.6 359.9 10.2 % 4,828.1 1,842.2 3,507.1 10.3 %
1,309.0 162.9 12.4 % 1,383.6 258.2 1,138.7 14.3 %
4,575.0 479.0 10.5 % 5,371.2 1,800.0 4,090.6 11.7 %
3,395.3 334.7 9.9 % 4,381.7 1,635.5 3,252.2 10.3 %
1,179.7 144.3 12.2 % 989.5 164.5 838.4 17.2 %
499.8 590.0
143.9 473.3
355.9 116.7
306.6 181.0
205.5 108.8
101.1 72.2
(201.0) 17,494
(141.9) 12,001
(59.1) 5,493
(198.1) 17,973
(144.1) 13,812
(54.0) 4,161
Reconciliation of segment assets and liabilities
Total assets Financial assets Securities and cash Other assets Segment assets Total liabilities and equity Financial debt Tax liabilities Segment liabilities
70
28.02.2005
29.02.2004
7,194.9 (329.6) (272.0) (381.6) 6,211.7 4,457.3 (1,944.3) (412.6) 2,100.4
6,037.7 (267.8) (305.7) (93.0) 5,371.2 3,651.8 (1,405.5) (446.3) 1,800.0
2. Geographic segments
Revenues Germany Other EU 15 Total EU 15 Eastern Europe Other countries Segment assets Total EU 15 Eastern Europe Other countries Expenditures on property, plant and equipment Total EU 15 Eastern Europe
2004/05
2003/04
1,331.3 2,777.7 4,109.0 661.1 56.5 4,826.6
1,440.1 2,648.7 4,088.8 443.7 42.5 4,575.0
5,398.4 792.1 21.2 6,211.7
4,835.7 519.9 15.6 5,371.2
452.6 47.2 499.8
281.4 25.2 306.6
71
Consolidated financial statements Notes to the consolidated financial statements for the financial year from 1 March 2004 to 28 February 2005 (1) Principles of preparation of the consolidated financial statements The consolidated financial statements of Südzucker AG for 2004/05 have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), London, and interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC) in force at 28 February 2005. The conditions set out in § 292a of the German Commercial Code for exemption from preparation of consolidated financial statements prepared in accordance with the German Commercial Code have been met. The significant differences between German accounting principles for consolidated financial statements and IFRS are as follows: - No annual amortisation of goodwill, but a requirement to test for impairment at least annually as set out in IFRS 3, - Classification of the balance sheet into non-current and current assets and liabilities, as set out in IAS 1 (revised 2003) - Different depreciation methods, as prescribed by IAS 16 (e.g. no systematic change to declining-balance method), - No recognition of internal expense provisions (e.g. maintenance provisions), as set out in IAS 37, - Valuation of pension provisions using the projected-unit-credit method, as set out in IAS 19, - Translation of foreign currency receivables and payables using rates ruling at the balance sheet date, as set out in IAS 21, - Requirement to recognise deferred income taxes using the liability method, as set out in IAS 12, - Requirement to recognise certain financial instruments at fair values, as set out in IAS 39, - Accounting for emission rights and actual emission obligations, as set out in IFRIC 3. Südzucker has applied IFRS 3 (business combinations) in connection with IAS 36 (revised) (impairment of assets) and IAS 38 (revised) (intangible assets) since 2003/04. In that same year, the following standards, revised as part of the IASB’s improvements project, were applied early: IAS 1 (presentation of financial statements), IAS 8 (accounting policies, changes in accounting estimates and errors), IAS 10 (events after the balance sheet date), IAS 16 (property, plant and equipment), IAS 17 (leases), IAS 21 (the effects of changes in foreign exchange rates), IAS 24 (related party disclosures), IAS 27 (consolidated and separate financial statements), IAS 28 (investments in associates), IAS 31 (financial reporting of interests in joint ventures), IAS 33 (earnings per share) and IAS 40 (investment property). IFRS 2 (share-based payments), IFRS 4 (insurance contracts), IFRS 5 (non-current assets held for sale and discontinued operations), the revised IAS 19 (employee benefits) and IAS 39 (financial instruments: recognition and measurement) cover matters of no relevance to the Südzucker Group or which have an insignificant effect on the financial statements. These standards are to be applied in 2005/06 or thereafter.
72
(2) Companies included in consolidation In addition to Südzucker AG, all domestic and foreign subsidiaries in which Südzucker AG has direct or indirect financial control and which are not immaterial are fully consolidated in the consolidated financial statements. 150 companies (2003/04: 145) were included in the consolidated financial statements for the year ended 28 February 2005. 22 companies have been included in the consolidated financial statements for the first time. 17 companies were merged in 2004/05 or are no longer part of the group. Südzucker increased its holding in RT Group to 99.6 % by the acquisition of 14.2 % of the shares in Raffinerie Tirlemontoise S.A., previously held by institutional investors (purchase price: € 368.6 million). Südzucker sold its direct holding in AGRANA Beteiligungs-AG to AGRANA Zucker, Stärke und Frucht Holding AG. Thereafter, AGRANA successfully placed a capital increase in February 2005, thereby increasing the free float to 24.5 %. This led to a reduction in our overall holding to 37.75 %. The Steirerobst Group, consisting of seven entities, was fully consolidated as from the beginning of the second quarter of 2004/05. Following the acquisition of further shares in March 2004, AGRANA increased its holding in Steirerobst AG’s share capital to 50.8 %. 100 % of the share capital of the Wink Group was acquired on 3 January 2005 and its balance sheet was included in the consolidated financial statements for the first time at 28 February 2005. Wink is is one of Europe’s largest producers of fruit-juice concentrates and has four production facilities, of which two are in Hungary with one each in Poland and Romania. The head office, with administrative and centralised logistics staff, is located in Bingen, Germany. The total acquisition cost for Wink, which has been fully consolidated, was € 69.0 million. The effects on the consolidated financial statements of the change in companies consolidated are as follows:
First-time consolidated companies 2004/05 D million Non-current assets
109.2
Current assets
130.6
Total assets
239.8
Shareholders’ equity
83.2
Provisions and liabilities
156.6
Total liabilities and equity
239.8
Revenues Earnings for the year
95.1 5.0
73
Consolidated financial statements
The effects of de-consolidations were insignificant. The proportionate consolidation method was used for two (2003/04: two) joint ventures. Proportionately consolidated companies 2004/05
2003/04 D million
Non-current assets
16.6
16.1
Current assets
23.3
26.8
Total assets
39.9
42.9
Shareholders' equity
19.2
19.9
Provisions and liabilities
20.7
23.0
Total liabilities and equity
39.9
42.9
Revenues
62.1
56.2
Earnings for the year
14.5
11.1
The equity method was used for 34 (5) companies. Both revenues and earnings of entities included at equity increased sharply in 2004/05. This is due to the first-time inclusion at equity of the Atys Group and good results of operations for the eastern European activities of Eastern Sugar. Atys will be fully consolidated during 2005/06 following an increase in the group’s shareholding. Steirerobst Group, included at equity in the previous year, was fully consolidated as from 1 June 2004 for nine months of 2004/05. Due to their insignificance, as set out in IAS 28, 12 associated companies were included in the consolidated financial statements at cost.
Companies included at equity 2004/05
2003/04 D million
Non-current assets
207.6
132.3
Current assets
380.7
158.3
Total assets
588.3
290.6
Shareholders' equity
194.9
128.6
Provisions and liabilities
393.4
162.0
Total liabilities and equity
588.3
290.6
Revenues
694.6
280.9
25.9
3.2
Earnings for the year
74
(3) Consolidation methods The equity consolidation has been made using the purchase method, under which acquisition cost is set off against the relevant share of the subsidiary company's equity at the time of acquisition. Any difference has been allocated to assets insofar as their fair values differed from carrying values at that time. Any remaining difference (goodwill) is initially included in intangible assets. As set out in IFRS 3, goodwill is no longer subject to annual amortisation over its useful life, but is subject to an impairment test at least annually, which can result in an impairment writedown (impairment-only approach). Investments in non-consolidated affiliated companies are stated at acquisition cost. Investments in associated companies are included in the consolidated financial statements using the equity method as from their date of their acquisition or initial consolidation. In the event of step acquisitions of shares in fully consolidated subsidiaries, any resulting goodwill is also included in intangible assets. Gains and losses on issuing shares in subsidiaries to third parties, as a result of which the group’s holding is reduced (dilution gains and losses), are recorded in the income statement as part of special items. Intercompany revenues, expenses and income and all receivables, liabilities and provisions between consolidated entities have been eliminated. Intercompany profits included in non-current assets and inventories and arising from intercompany transfers are eliminated. Results of the companies making up the AGRANA Fruit Group have been included in the consolidated financial statements for the calendar year ended 31 December 2004, and significant transactions through 28 February 2005 have been appropriately considered, as set out in IAS 27.
75
Consolidated financial statements
(4) Foreign currency translation As set out in IAS 21, the financial statements of group companies have been translated directly from local currency into the reporting currency (€), as the foreign entities carry out their financial, operating and organisational activities autonomously (the functional currency concept). Hence, non-current assets, other assets and liabilities have been translated using mid-market rates ruling at the end of the year (year-end rates). Income and expense items have been translated at average rates for the year. Movements in exchange rates of the significant currencies used in preparing the consolidated financial statements were as follows (conversion rates to € 1): Year-end rate 28.02.2005
29.02.2004
Average rate 2004/05
2003/04
Local currency Brazil
BRL
3.4707
3.6360
3.2958
3.4571
Chile
CLP
763.2423
740.5200
700.4240
770.5380
Great Britain
GBP
0.6894
0.6707
0.6803
0.6954
Denmark
DKK
7.4385
7.4516
7.4399
7.4336
Malaysia
MYR
5.0060
4.7311
4.3539
4.4347
Moldova
MDL
16.5155
15.7520
15.3604
15.8906
Poland
PLN
3.9115
4.8816
4.4169
4.5194
Russia
RUB
36.6500
35.3700
32.8458
35.0480
Singapore
SGD
2.1546
2.1070
2.1020
2.0163
Slovakia
SKK
37.8700
40.5300
39.6589
41.3044
The Czech Republic
CZK
29.7000
32.4500
31.4485
32.0262
Ukraine
UAH
7.0294
6.6413
6.6492
6.2038
Hungary
HUF
241.7251
257.1752
248.6851
257.0417
USA
USD
1.3254
1.2407
1.2500
1.1630
Differences arising from translating assets and liabilities at year-end rates compared with rates ruling at the end of the previous year, together with differences between earnings for the year translated at average rates in the income statement and at year-end rates in the balance sheet, are charged or credited directly to reserves. The effect in 2004/05 was to increase non-current assets by € 19.8 million and shareholders’ equity by € 34.0 million, primarily due to the effects of including the Polish entities, due to an increase of 19.9 % in the value of the PLN (year-end rate) over the euro. Foreign currency receivables and liabilities included in the financial statements of consolidated companies have been translated at year-end rates, with any resulting unrealised gains and losses recorded in the income statement.
76
(5) Accounting policies Acquired goodwill is recognised in the balance sheet as part of intangible assets. Intangible assets acquired in business combinations are stated separately from goodwill if, as defined in IAS 38, they are separable or arise from contractual or other legal rights and their fair value can be measured reliably. Other acquired intangible assets are included at acquisition cost less scheduled, straight-line amortisation over their expected useful lives. Effective 1 March 2003, goodwill and intangible assets with indefinite useful lives are no longer being amortised annually, but are subject to an impairment test at least annually. The procedure adopted in carrying out this impairment test is described more fully in the notes on balance sheet items below. Items of property, plant and equipment are stated at acquisition or production cost less straight-line depreciation and impairment write-downs, where applicable. State subsidies and grants are deducted from acquisition cost. Production cost of internally-constructed equipment includes the cost of production materials, production wages and an appropriate share of overheads; third-party borrowing costs relating to the production are not included. Maintenance expenses are recorded in the income statement when they are incurred. Scheduled depreciation of property, plant and equipment and of intangible assets with finite useful lives is charged based on the following useful lives: Intangible assets, including goodwill Buildings
2 to 5 years 15 to 50 years
Technical equipment and machinery
6 to 30 years
Other equipment, factory and office equipment
3 to 15 years
Impairment write-downs of property, plant and equipment and intangible assets with finite useful lives are charged as set out in IAS 36 when the recoverable amount of an asset falls below its carrying amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and the present value of expected cash flows from use of the asset (value in use). Shares in non-consolidated affiliated companies are included at acquisition cost. Investments in associated companies, unless insignificant, are included using the equity method. The valuation of other investments and securities depends on their classification as held to maturity or available for sale. Financial assets which are held to maturity are stated at amortised acquisition cost. Financial assets classified as available for sale are stated at fair value in the balance sheet, and any unrealised gains and losses are credited or charged direct to fair value reserve in shareholders’ equity, net of any deferred taxes. Impairments are recorded directly in the income statement. Purchases and sales of securities are initially recorded at settlement date.
77
Consolidated financial statements
Inventories are stated at acquisition or production cost using average cost or the first-in, first-out method. As set out in IAS 2, the production cost of work in progress and finished goods includes direct costs and a reasonable proportion of material and production overheads, including depreciation of production machinery assuming normal levels of production capacity, and a proportion of administrative expenses. Write-downs are made to net realisable value where necessary. Specific write-downs are charged against slow-moving items and against items for which net realisable value is lower than cost. Receivables in current assets are stated at nominal values, less adequate allowances for bad debts and other risks in receivables. Securities in current assets include securities classified as available for sale which are stated at fair value. Until realised, any resulting unrealised gains and losses are credited or charged direct to fair value reserve in shareholders’ equity, net of deferred taxes. Cash and cash equivalents are included at nominal value. Except for goodwill, reversals of write-downs of items included in non-current assets and current assets are made when the reason for charging the original impairment loss no longer exists. Recognition of CO2 emission certificates received and the related recognition of liabilities arising from CO2 emissions has been made in accordance with IFRIC Interpretation 3. Emission certificates granted for the 2005 calendar year are stated at fair values in other current assets. Deferred income has been recognised in the same amount, reduced by liabilities for actual CO2 emissions. The certificates and the emission liabilities will be de-recognised when the used CO2 emission certificates are accounted for with the relevant state authorities. Provisions for pensions are included as set out in IAS 19. Actuarial reports have been prepared for this purpose. Actuarial gains and losses arising from unexpected changes in the amount of the defined benefit obligation and from changes in actuarial assumptions, and which lie within a corridor of 10 % of the defined benefit obligation, are not recognised. Such actuarial gains and losses are only recognised over the expected average remaining working lives of the pension plan beneficiaries to the extent they exceed this corridor. Other provisions cover all discernible risks and uncertain obligations. The amount of each provision is the probable or expected amount, based on the facts in each case. Deferred taxes are recognised on temporary differences between the values of assets and liabilities in the IFRS balance sheet and the tax balance sheet, as well as on tax loss carry forwards. Deferred tax assets and deferred tax liabilities are recognised separately on the face of the balance sheet. Deferred tax assets have been offset against deferred tax liabilities to the extent the related taxes on income are imposed by the same tax authorities. Deferred taxes are measured as set out in IAS 12 based on the appropriate local corporate income tax rate.
78
All liabilities are stated at the amounts due for payment. Financial liabilities for bonds issued are shown net of their issue discount and transaction costs. The discount is being amortised using the effective yield method. We refer to notes (16) and (17) for details of the recognition and measurement of financial instruments. Appropriate provisions have been set up for risks arising from contingent liabilities. Lease agreements within the Südzucker Group are all deemed to be operating leases, so lease payments are expensed when incurred. Südzucker Group is not a lessor in any lease contracts. Revenues from the sale of products and goods are recognised when the delivery or service has been rendered and risks and rewards of ownership have been transferred. Rebates and price reductions are also included at the time revenues are recognised. Research and development expenses are charged to the income statement in the period in which they are incurred. Development costs for new products are not recognised as intangible assets, as future economic benefit can only be proven once the products have been brought to market. All accounting policy-related estimates and assessments are constantly reviewed, based on past experience and on expectations of the occurrence of future events to the extent it is considered reasonable to do so.
79
Consolidated financial statements
Notes to the balance sheet (6) Intangible assets
2004/05
Goodwill
On-account payments on intangible assets
Total
88.7
1,412.0
0.4
1,501.1
Change in companies incl. in the consolidation / currency translation / other changes
4.1
267.7
0.8
272.6
Additions
5.5
0.4
0.8
6.7
Transfers
0.3
0.0
(0.4)
(0.1)
Disposals
(0.8)
(0.8)
(0.2)
(1.8)
28 February 2005
97.8
1.679.3
1.4
1,778.5
(74.6)
0.0
0.0
(74.6)
Change in companies incl. in the consolidation / currency translation / other changes
(2.6)
0.0
0.0
(2.6)
Amortisation for the year
(5.8)
(8.5)
0.0
(14.3)
Transfers
(0.1)
0.0
0.0
(0.1)
Disposals
0.7
0.0
0.0
0.7
(82.4)
(8.5)
0.0
(90.9)
15.4
1,670.8
1.4
1,687.6
€ million
Concessions, industrial and similar rights
Acquisition costs 1 March 2004
Amortisation 1 March 2004
28 February 2005
Net book value at 28 February 2005
80
2003/04
Goodwill
On-account payments on intangible assets
Total
84.6
1,258.8
0.0
1,343.4
Change in companies incl. in the consolidation / currency translation / other changes
0.3
83.6
0.0
83.9
Additions
5.1
69.6
0.4
75.1
Transfers
1.1
0.0
0.0
1.1
Disposals
(2.4)
0.0
0.0
(2.4)
29 February 2004
88.7
1,412.0
0.4
1,501.1
(72.0)
0.0
0.0
(72.0)
Change in companies incl. in the consolidation / currency translation / other changes
(0.2)
0.0
0.0
(0.2)
Amortisation for the year
(4.8)
0.0
0.0
(4.8)
Transfers
0.0
0.0
0.0
0.0
Disposals
2.4
0.0
0.0
2.4
(74.6)
0.0
0.0
(74.6)
14.1
1,412.0
0.4
1,426.5
€ million
Concessions, industrial and similar rights
Acquisition costs 1 March 2003
Amortisation 1 March 2003
29 February 2004
Net book value at 29 February 2004
81
Consolidated financial statements
Intangible assets consist mainly of goodwill arising on business combinations, recognised as set out in IFRS 3. Intangible assets also include acquired EDP software and trademarks and similar rights with limited useful lives. Of the carrying value of the goodwill at 28 February 2005 of € 1,670.8 million, the amount relating to the sugar segment was € 1,283.8 million and the remaining € 387.0 million related to the special products segment. The increase in goodwill in 2004/05 is primarily attributable to the acquisition of 14.2 % of the shares in Raffinerie Tirlemontoise held by institutional investors, as well as the first-time consolidation of Wink Group. In order to comply with IFRS 3 in connection with IAS 36 (revised 2004) and in order to determine any impairment losses on goodwill, Südzucker identified its cash generating units based on its internal reporting system. In the Südzucker Group, these consist of the sugar segment, Freiberger Group, Palatinit, ORAFTI, Surafti, PortionPack, starch and fruit. The carrying value of each cash generating unit was determined by allocating the assets and liabilities, including the related goodwill and intangible assets, to the respective cash generating units. An impairment write-down is to be charged if the recoverable amount of a cash generating unit is lower than its carrying value. The recoverable amount is defined as the higher of the fair value less costs to sell and value in use. In carrying out the impairment tests, Südzucker used a discounted cash flow approach, based on future cash flows. Future cash flows were determined based on budgets with a specific forecast period of five years. We have assumed a growth rate of 1.5 % (1.5 %) p. a. after the five-year specific forecast period, including inflation. The discount rate used, based on Südzucker Group’s cost of capital, was 6.5 % (7.5 %) p. a. . The forecast for the sugar segment included assumptions relating to the effects on income from future changes to the sugar market regulation. The reform of the EU’s sugar market regulation will probably commence in 2006/07. The extent of price reductions is still open and will be limited by the necessities arising from WTO-II and resistance to exaggerated price reductions from a considerable number of member states. The reforms will have to lead to a decrease in the production of European quota sugar, on the one hand from import obligations to the ACP countries and from the EBA treaties, and on the other hand due to restrictions placed on EU exports by the WTO Panel. The reform plans submitted by the EU commission in July 2004 aimed at achieving this decrease in production by concentrating European sugar production on Europe’s efficient regions. Südzucker expects that the concentration of European sugar production will be implemented with the help of a restructuring fund. This proves the correctness of Südzucker’s strategy of only producing in Europe’s best beet-growing areas. Südzucker will take maximum advantage of this geographically-based competitive advantage and defend its profitability. No impairment was identified for any of the goodwill recognised in the consolidated balance sheet and allocated to cash generating units. No impairment write-downs were required.
82
(7) Property, plant and equipment
2004/05 Land, land rights and buildings including buildings on leased land
Technical equipment and machinery
Other equipment, factory and office equipment
1,245.5
3,357.2
237.0
46.1
4,885.8
Change in companies incl. in the consolidation / currency translation / other changes
91.7
100.9
28.3
3.4
224.3
Additions
86.3
304.1
25.2
77.5
493.1
Transfers
12.7
33.9
2.1
(48.6)
0.1
Disposals
(44.1)
(130.4)
(20.6)
(4.3)
(199.4)
1,392.1
3,665.7
272.0
74.1
5,403.9
(611.9)
(2,427.6)
(179.9)
(1.8)
(3,221.2)
Change in companies incl. in the consolidation / currency translation / other changes
(33.8)
(50.3)
(15.6)
(0.2)
(99.9)
Depreciation for the year
(36.6)
(138.7)
(20.3)
0.0
(195.6)
Transfers
0.1
(0.1)
0.1
0.0
0.1
Disposals
38.6
126.9
18.4
0.0
183.9
Write-ups
1.7
3.9
(0.1)
0.0
5.5
(641.9)
(2,485.9)
(197.4)
(2.0)
(3,327.2)
750.2
1,179.8
74.6
72.1
2,076.7
€ million
On-account payments and assets under construction
Total
Acquisition costs 1 March 2004
28 February 2005
Depreciation 1 March 2004
28 February 2005
Book value at 28 February 2005
83
Consolidated financial statements
2003/04 Land, land rights and buildings including buildings on leased land
Technical equipment and machinery
Other equipment, factory and office equipment
1,157.0
3,178.0
224.1
25.2
4,584.3
Change in companies incl. in the consolidation / currency translation / other changes
78.6
96.7
11.3
1.7
188.3
Additions
35.9
129.1
20.2
46.3
231.5
Transfers
4.9
19.2
1.0
(26.2)
(1.1)
Disposals
(30.9)
(65.8)
(19.6)
(0.9)
(117.2)
1,245.5
3,357.2
237.0
46.1
4,885.8
(534.0)
(2,272.3)
(170.2)
(0.4)
(2,976.9)
Change in companies incl. in the consolidation / currency translation / other changes
(43.0)
(63.2)
(9.3)
(1.0)
(116.5)
Depreciation for the year
(53.7)
(151.9)
(18.3)
(0.4)
(224.3)
Transfers
0.0
0.0
0.0
0.0
0.0
Disposals
18.5
59.5
17.7
0.0
95.7
Write-ups
0.3
0.3
0.2
0.0
0.8
(611.9)
(2,427.6)
(179.9)
(1.8)
(3,221.2)
633.6
929.6
57.1
44.3
1,664.6
€ million
On-account payments and assets under construction
Total
Acquisition costs 1 March 2003
29 February 2004
Depreciation 1 March 2003
29 February 2004
Book value at 29 February 2004
84
Additions (capital expenditures) to property, plant and equipment (including intangible assets) are as follows: 2004/05
2003/04 D million
Sugar
143.9
205.5
Special products
355.9
101.1
Total
499.8
306.6
The increase in capital expenditures in the special products segment is primarily due to the expansion of Palatinit capacity, construction of an ORAFTI factory in Chile and completion of the bioethanol plant in Zeitz. The decrease in the sugar segment is due to the previous year’s acquisition of 67,000 t quotas in France.
85
Consolidated financial statements
(8) Financial assets
2004/05
€ million
Shares in affiliated companies
Investments Securities in in associated Other non-current companies investments assets
Loans
Total
Acquisition costs 1 March 2004
6.8
64.2
192.7
24.9
16.0
304.6
Change in companies incl. in the consolidation / currency translation / other changes
1.6
24.0
(44.1)
2.4
0.1
(16.0)
Additions
0.0
77.6
31.4
0.3
0.0
109.3
Transfers
0.0
0.0
0.0
0.0
0.0
0.0
Disposals
(2.0)
(0.3)
(46.4)
(0.7)
(0.4)
(49.8)
6.4
165.5
133.6
26.9
15.7
348.1
1 March 2004
(2.5)
(9.8)
(18.6)
(1.8)
(4.1)
(36.8)
Change in companies incl. in the consolidation / currency translation / other changes
(0.2)
7.3
5.6
(0.2)
0.0
12.5
Depreciation
(0.3)
0.0
(0.3)
0.0
(0.1)
(0.7)
Transfers
0.0
0.0
0.0
0.0
0.0
0.0
Disposals
2.0
0.0
4.5
0.0
0.0
6.5
Write-ups
0.0
0.0
0.0
0.0
0.0
0.0
(1.0)
(2.5)
(8.8)
(2.0)
(4.2)
(18.5)
5.4
163.0
124.8
24.9
11.5
329.6
28 February 2005
Depreciation
28 February 2005
Book value at 28 February 2005
86
2003/04
€ million
Shares in affiliated companies
Investments Securities in in associated Other non-current companies investments assets
Loans
Total
Acquisition costs 1 March 2003
3.6
296.7
92.7
34.1
8.9
436.0
(1.0)
(19.8)
11.5
1.7
0.1
(7.5)
Additions
2.5
22.5
55.3
0.3
8.1
88.7
Transfers
1.7
(43.7)
42.2
(0.1)
(0.1)
0.0
Disposals
0.0
(191.5)
(9.0)
(11.1)
(1.0)
(212.6)
29 February 2004
6.8
64.2
192.7
24.9
16.0
304.6
(2.5)
(53.0)
(17.1)
(1.8)
(3.7)
(78.1)
Change in companies incl. in the consolidation / currency translation / other changes
0.0
1.9
(0.1)
0.0
0.0
1.8
Depreciation
0.0
0.0
(0.2)
0.0
(0.5)
(0.7)
Transfers
0.0
5.8
(5.8)
0.0
0.0
0.0
Disposals
0.0
35.5
4.5
0.0
0.0
40.0
Write-ups
0.0
0.0
0.1
0.0
0.1
0.2
(2.5)
(9.8)
(18.6)
(1.8)
(4.1)
(36.8)
4.3
54.4
174.1
23.1
11.9
267.8
Change in companies incl. in the consolidation / currency translation / other changes
Depreciation 1 March 2003
29 February 2004
Book value at 29 February 2004
A list of all shareholdings as required by § 313 para. 4 HGB has been filed with the commercial register of the district court of Mannheim. The increase of € 108.6 million in the carrying values of the investments in associated companies, from € 54.4 million to € 163.0 million, is mainly attributable to the addition of the Atys Group. Disposals of other investments relate mainly to the sale of shares in KWS Saat AG. Of the loans, € 10.3 million (€ 9.3 million) relate to associated companies.
87
Consolidated financial statements
(9) Inventories
28/29 February
2005
2004 D million
Raw materials and supplies
170.6
133.8
Work in progress
510.6
374.6
1,265.1
1,136.5
8.1
0.4
1,954.4
1,645.3
Finished goods and merchandise On-account payments
The carrying value of inventories measured at net realisable value is € 91.3 million (€ 28.8 million).
(10) Trade and other receivables
28/29 February
2005
2004 D million
Trade receivables
446.8
412.1
Receivables from affiliated companies
8.3
18.2
Receivables from participating interests
4.0
4.7
Other assets
249.9
171.4
Current tax recoverable
147.8
97.8
856.8
704.2
Receivables from affiliated companies arise solely from current account transactions with unconsolidated subsidiaries. The increase in other assets is primarily attributable to the increase in receivables from export recoveries. Other assets also include emission certificates of € 20.4 million for the first time.
88
(11) Cash and cash equivalents
28/29 February
2005
2004 D million
Other securities
161.5
104.5
Cash
110.5
201.1
272.0
305.6
Other securities consist of short-term bonds and debentures, equities and fund certificates and are readily marketable.
(12) Shareholders’ equity The subscribed capital of Südzucker AG is divided into 174,787,946 shares, each share having an imputed proportion of the share capital of € 1.00 each. On 28 February 2005 the company held 2,922,400 Südzucker AG shares for its own account. The share capital has been conditionally increased by up to € 13,000,000. The conditional increase will only be carried out, by issuing up to 13,000,000 new shares, to the extent required to meet the conversion rights arising from the convertible bonds issued on 8 December 2003. The value of the option premium of € 13.0 million has been transferred to capital reserves. No new shares were issued in 2004/05 to meet these conversion obligations. As a result of capital increases at subsidiaries in 2004/05, minority interest rose by € 248.0 million. This was particularly due to the issue of new shares by AGRANA Beteiligungs-AG in February 2005. On the other hand, minority interest decreased due to the acquisition of 14.2 % of the shares in Raffinerie Tirlemontoise in the first quarter of 2004/05. Overall, minority interest rose by € 137.4 million. The decrease in the fair value reserve primarily reflects the sale of the remaining 10 % shareholding in KWS Saat AG.
89
Consolidated financial statements
(13) Provisions for pensions and similar obligations Pension plans within the Südzucker Group mainly consist of direct benefit plans. Pension benefits are normally granted based on years of service with the company and benefit-related remuneration. The provisions for pensions have been calculated actuarially using the projected-unit-credit method and estimated future trends in accordance with IAS 19 (Employee benefits). A discount rate of 4.75 % (5.5 %) was used for the pension plans of domestic companies. An expected annual increase of between 2.0 % and 3.0 % (2.0 % and 3.0 %) in remuneration and an increase of 1.3 % to 1.8 % (1.4 % to 1.9 %) in pensions has been assumed for the companies. Expected future yields on plan assets are assumed to be 4.75 % (5.5 %) p.a. . Pension expense is made up as follows:
2004/05
2003/04 D million
Current service cost
10.2
12.9
Interest cost
21.3
21.7
31.5
34.6
There were no expenses or income arising from changes in plan benefits or from actuarial gains or losses. Interest cost has been included in interest expense in the statement of income. Service cost is included under personnel expense. A reconciliation of the defined benefit obligation and the provision shown in the consolidated balance sheet is as follows:
28/29 February
2005
2004 D million
90
Defined benefit obligations for direct pension benefits
530.5
484.7
Unamortised actuarial gains and losses
(49.7)
(13.8)
Fair value of plan assets
(87.8)
(91.8)
Provision for pensions
393.0
379.1
The amount of unamortised actuarial gains and losses includes losses on plan assets of € 6.0 million (€ 13.8 million). Movements in the provision for direct benefit obligations were as follows: 2004/05
2003/04 D million
Provision at 1 March
379.1
369.1
9.5
0.0
Amounts charged to expense
31.5
34.6
Contributions to fund assets
(0.3)
(0.2)
Pension payments during the period
(26.8)
(24.4)
Provision at 28/29 February
393.0
379.1
Change in companies consolidated
There are similar obligations, particularly relating to foreign group companies, which are calculated actuarially, including estimates of future cost trends.
(14) Movements in provisions 01.03.2004 D million
Change in companies consolidated
Additions
Use
Release
28.02.2005
Provision for pensions and similar obligations
379.1
9.2
31.5
26.8
0.0
393.0
Deferred tax liabilities
333.0
4.2
62.4
0.0
69.4
330.2
Tax liabilities
140.3
6.1
80.0
112.6
0.2
113.6
EU levies for financing the sugar market ordinance
144.2
0.1
192.1
145.7
0.2
190.5
Personnel expenses
148.1
(6.0)
77.6
75.4
6.9
137.4
Other provisions
205.4
(0.8)
80.1
102.4
13.9
168.4
638.0
(0.6)
429.8
436.1
21.2
609.9
1,350.1
12.8
523.7
462.9
90.6
1,333.1
Other provisions
Total other provisions Total provisions
The liabilities for taxes relate to the current year and those years not yet audited by the tax authorities. Other provisions include amounts relating to re-cultivation obligations, waste water charges and other environmental obligations.
91
Consolidated financial statements
(15) Due dates of financial liabilities and other liabilities
28.02.2005
of which remaining term up to 1 to 5 over 1 year years 5 years
29.02.2004
of which remaining term up to 1 to 5 over 1 year years 5 years
D million Bonds (of which convertible)
1,386.7 257.2
309.4 0.0
255.3 235.2
822.0 22.0
1,198.9 250.3
148.6 0.0
231.3 231.3
819.0 19.0
Liabilities to banks
557.6
419.2
74.8
63.6
206.6
177.3
24.9
4.4
Bills payable
0.0
0.0
–
–
0.0
0.0
–
–
Total financial liabilities
1,944.3
728.6
330.1
885.6
1,405.5
325.9
256.2
823.4
On-account payments received on orders
7.4
7.4
0.0
0.0
5.6
5.6
0.0
0.0
861.2
860.7
0.5
0.0
718.1
717.6
0.5
0.0
23.8
23.2
0.6
0.0
10.1
10.1
0.0
0.0
1.2
1.2
0.0
0.0
15.2
15.2
0.0
0.0
286.3 32.7
263.9 32.7
21.2 0.0
1.2 0.0
147.2 19.9
122.8 19.7
23.0 0.2
1.4 0.0
26.8
26.8
0.0
0.0
25.2
25.2
0.0
0.0
1,179.9
1,156.4
22.3
1.2
896.2
871.3
23.5
1.4
3,124.2
1,885.0
352.4
886.8
2.301.7
1.197.2
279.7
824.8
Trade accounts payable Accounts payable to affiliated companies Accounts payable to participating interests Other liabilities (of which for taxes) (of which for social security) Total other liabilities
Further disclosures on financial liabilities are included in note (16) on financial instruments. Liabilities to banks of € 31.6 million (€ 7.3 million) were secured by real estate mortgages and of € 5.7 million (€ 5.3 million) by other collateral pledged at 28 February 2005. Trade accounts payable include amounts due to beet farmers totalling € 580.2 million (€ 490.8 million).
92
Balance sheet structure (L million) Group 28 February 2005 Assets
7,195
7,195
Liabilities and shareholders' equity
Other current assets 15.7 %
1,129
2,294
Third-party liabilities (current) 31.9 %
Inventories 27.2 %
1,954
2,163
Third-party liabilities (non-current) 30.1 %
Non-current assets 57.1 %
4,112
2,738
Shareholders' equity 38.0 %
(16) Lending and borrowing activities (financial instruments) Südzucker has issued bonds with nominal values of € 300 million (6.25 %, due 8 June 2010) and € 500 million (5.75 %, due 27 February 2012) and a convertible bond of € 250 million (due 8 December 2008). The convertible bond has a 3 % coupon and can be converted into Südzucker shares at a price of € 20.53 per share. Furthermore, Südzucker Group’s treasury management controls seasonal fluctuations in liquidity on a daily basis by placing funds through market channels (normal market overnight money, term deposits and securities) and raising funds by drawing down overnight and short-term funds, fixed-interest rate loans or issuing commercial paper (CP). The CP program has a volume of € 500 million and enables Südzucker AG, either directly or under its guarantee via Südzucker International Finance B.V., a Dutch group financing company, to issue short-term bonds and debentures as the need arises and when market conditions are suitable.
93
Consolidated financial statements
Financial instruments are normally subject to interest rate change risk, foreign currency risk and credit risk, as follows: Interest rate change risk: For fixed-interest rate deposits or loans there is a risk that a change in market interest rates will lead to a change in market price (interest-related fair value risk). On the other hand, variable-interest rate deposits or loans are not subject to price risk, as the interest rate is adjusted timely to market interest rates. However, due to fluctuations in short-term interest rates there is a risk relating to future interest payments (interest-related cash flow risk). Currency risk: Foreign currency risk is the risk of changes in fair values of balance sheet items induced by changes in exchange rates. Credit risk: Credit risk is the risk that a counterparty will be unable to pay. Credit risks arising from deposits, securities and receivables from derivative hedge transactions are minimised by only doing business with counterparties with first-class creditworthiness. Financial liabilities 28 February 2005
Terms
Interest rates
Average rates
Book value
years
%
%
D million
Bonds
to 7
1.64 – 6.25
5.14
1,077.3
Commercial paper
to1
2.12 – 2.15
2.14
309.4
4.82
557.6
4.57
1,944.3
Liabilities to banks
The book values of financial liabilities are the same as their repayment amount. For commercial paper and liabilities to banks, book values are the same as their fair values. The fair value of the bonds is their market value at the end of the year, and amounts to € 1,196.1 million. Bonds of € 1,045.0 million (€ 1,051.0 million), and € 166.5 million (€ 33.9 million) of the liabilities to banks, are fixed-interest.
94
(17) Derivative instruments Südzucker Group uses derivative instruments to a limited extent to hedge part of the risks arising from its operating activities and planned funding needs for its capital expenditures. The Südzucker Group mainly hedges the following risks: Interest-rate change risk on money market interest rates mainly resulting from fluctuations in liquidity levels during the campaign season, or existing or planned floating rate debt. Foreign currency change risk which can primarily arise from sales of sugar on the world market in US dollars and from payment obligations in foreign currencies. Product price change risk which can arise from price fluctuations on the global sugar market as well as in the energy sector. Only normal market instruments are used for hedging purposes, such as interest-rate swaps, caps and futures, and foreign currency futures. These instruments are used within the framework of Südzucker’s risk management system as laid down in group guidelines, which set limits based on underlying business volumes, define authorisation procedures, prohibit the use of derivative instruments for speculative purposes, minimise credit risks and determine the content of internal reporting and segregation of duties. Reviews are carried out regularly to ensure compliance with these guidelines and the correct processing and valuation of transactions, and adherence to segregation of duties. The nominal and market values of derivative instruments and their credit risks within the Südzucker Group are as follows:
€ million 28/29 February
Nominal volume 2005 2004
Fair value 2005 2004
Interest rate hedges
916.7
994.7
(61.2)
(79.0)
-
-
Currency hedges
111.0
63.0
1.8
0.3
2.1
0.9
Product price hedges
55.2
25.3
0.3
0.4
0.7
0.7
1,082.9
1,083.0
(59.1)
(78.3)
2.8
1.6
Total
Credit risk 2005 2004
Maturities of the currency derivatives and product derivatives are less than one year, and of the interest rate derivatives are between one and four years. The nominal volumes of a derivative hedge instrument are the imputed call amounts upon which the payments are calculated. The hedged transaction and risk is not the nominal value itself, but rather the related price or interest-rate change.
95
Consolidated financial statements
Fair value is the amount that the Südzucker Group would have had to pay or would have received assuming the hedge transaction were unwound at the end of the year. As the hedge transactions are only carried out using normal market tradable financial instruments, the fair values have been determined using quoted prices on exchanges without offsetting any possible value changes relating to the underlying transaction being hedged. Credit risks arise from the positive fair values of derivatives. These credit risks are minimised by only making financial derivative transactions with banks with first-class credit rankings. Changes in values of derivative transactions carried out to hedge future cash flows (cash flow hedges) are initially recorded direct to a special reserve in shareholders’ equity and are only subsequently recorded in the income statement when the cash flow occurs. Their fair values at 28 February 2005 totalled a negative € 15.6 million (€ 23.2 million). Changes in the fair values of interest rate derivatives originally used to hedge loans which have been repaid early are recorded direct to the statement of income.
(18) Contingent liabilities and other financial commitments Contingent liabilities and other financial commitments not recognised in the balance sheet are as follows:
28/29 February
2005
2004 € million
Discounted bills Guarantees and letters of comfort Warranty commitments Purchase order commitments for property, plant and equipment
0.7
0.7
38.5
2.6
2.2
2.2
101.8
218.7
The guarantees and letters of comfort relate to non-consolidated subsidiaries and third parties. Purchase order commitments for capital expenditures mainly relate to expansion of Palatinit and ORAFTI production facilities, together with capital expenditures required at the sugar factories before the beginning of the next campaign. The decrease compared with the previous year is due to the outstanding order at the end of last year for the bioethanol plant, which has since been completed. Südzucker is exposed to possible obligations arising from various claims or proceedings which are pending or which could be asserted. Any estimates of future costs arising in this area are of necessity subject to many uncertainties. Südzucker makes provisions for such risks to the extent a loss is deemed probable and the amount can be reliably estimated. .
96
Notes to the statement of income (19) Revenues Revenues rose by € 251.6 million, or 5.5 %, from € 4,575.0 million to € 4,826.6 million in 2004/05. Companies included in the consolidated financial statements for the first time contributed € 95.1 million to this increase.
(20) Change in work in progress and finished goods inventories and internal costs capitalised 2004/05
2003/04 € million
Change in work in progress and finished good inventories Internal costs capitalised
169.8
33.7
5.9
6.1
175.7
39.8
2004/05
2003/04
(21) Other operating income
€ million Income from disposals of non-current and current assets and from write-ups
12.4
9.2
Income from the release of provisions and accruals
21.0
26.6
Foreign exchange and currency translation gains
11.7
13.3
Other income
52.0
44.3
97.1
93.4
2004/05
2003/04
(22) Cost of materials
€ million Cost of raw materials, consumables and supplies and of purchased merchandise Cost of purchased services
2,871.1
2,661.0
182.4
163.2
3,053.5
2,824.2
97
Consolidated financial statements
(23) Personnel expenses 2004/05
2003/04 D million
Wages and salaries
456.4
435.7
Social security, pension and welfare expenses
128.7
128.9
585.1
564.6
2004/05
2003/04
Wage earners
11,797
12,152
Salaried staff
5,332
5,455
365
366
17,494
17,973
4,100
4,024
10,117
11,033
Eastern Europe
3,222
2,889
Other countries
55
27
17,494
17,973
Average number of employees during the year
Divided by group
Trainees
Divided by geographic area Germany Other EU countries
The average number of persons employed during the year declined slightly compared with the previous year. A reduction due to restructuring measures in Poland was nearly offset by the addition of employees as a result of the inclusion of Steirerobst Group.
(24) Depreciation 2004/05
2003/04 D million
Scheduled depreciation Intangible assets (excluding goodwill) Property, plant and equipment
Impairment write-downs Property, plant and equipment
98
5.9 193.1
4.8 188.3
199.0
193.1
2.0
5.0
201.0
198.1
Of the total impairment write-downs of € 2.0 million (€ 5.0 million), € 1.4 million (€ 3.7 million) relates to the sugar segment and € 0.6 million (€ 1.3 million) to the special products segment. Furthermore, total impairment write-downs of € 8.5 million (€ 31.1 million) due to factory closures are reflected in restructuring costs, so that depreciation and impairment write-downs total € 210.7 million (€ 229.8 million).
(25) Other operating expenses 2004/05
2003/04 D million
Selling and advertising expenses
300.4
268.3
Operating and administrative expenses
189.1
165.5
Production and supplementary levies
104.4
65.4
Leasing and rental expenses
29.6
27.1
Foreign currency losses
10.0
12.7
5.8
7.6
97.7
95.7
737.0
642.3
2004/05
2003/04
Losses on disposals of non-current and current assets Other expenses
(26) Restructuring costs and special items
D million Income from special items Expenses from restructuring costs and special items Restructuring costs and special items, net
60.4
49.1
(47.0)
(81.7)
13.4
(32.6)
Net results from restructuring costs and special items improved by € 46.0 million to € 13.4 million. Income from special items of € 60.4 million was achieved by the successful placing of a package of Fresenius shares, the sale of the remaining 10 % shareholding in KWS Saat AG and income from the dilution of our holding in AGRANA in connection with its capital increase. The main reason for the decrease in restructuring costs and special items was the charges recognised in 2003/04 relating to the closures of sugar factories in Belgium and Poland and the part-time, early retirement plan at Südzucker. Costs in 2004/05 related to unmarketable beet molasses pellets and start-up costs for the bioethanol and ORAFTI Chile plants. The Surafti division also incurred restructuring costs.
99
Consolidated financial statements
(27) Financial expense, net
2004/05
2003/04 D million
Income from other securities and loans included in financial assets
8.1
25.1
14.0
7.9
Interest and similar expenses
(116.5)
(105.2)
Interest expense, net
(94.4)
(72.2)
Income from investments (of which from affiliated companies) (of which from associated companies)
15.6 (1.9) 11.1
19.4 1.0 17.4
Income from investments
15.6
19.4
(78.8)
(52.8)
Other interest and similar income
Financial expense, net
(28) Taxes on income Income tax expense for 2004/05 increased to € 99.9 million compared with € 86.3 million for the previous year. Current income tax expense rose by € 5.3 million to € 107.5 million (€ 102.2 million) and there was a net deferred tax credit of € 7.6 million in 2004/05 (€ 15.9 million deferred tax credit in 2003/04). Amounts for 2004/05 included a one-time benefit from the reduction in the Austrian income tax rate from 34.0 % to 25.0 %. Deferred taxes are calculated on temporary differences between items in the group balance sheet and the balance of the same items in the local tax balance sheet. Deferred tax liabilities of € 330.2 million relate primarily to measurement differences for items in property, plant and equipment and inventories. Deferred taxes are calculated based on the local tax rate (37.9 % for Germany).
100
Deferred taxes relate to the following temporary differences:
Deferred tax assets 28.02.2005
Deferred tax liabilities
29.02.2004
28.02.2005
29.02.2004
€ million Non-current assets
1.3
1.3
211.2
204.5
Current assets
3.2
2.9
114.4
127.3
Tax-free reserves
0.0
0.0
7.6
9.2
Provisions
24.4
32.9
36.1
36.5
Liabilities
7.0
3.8
0.8
0.5
17.0
22.3
0.0
0.0
52.9
63.2
370.1
378.0
Offsets
(39.9)
(45.0)
(39.9)
(45.0)
Balance sheet item
13.0
18.2
330.2
333.0
Tax loss carryforwards
A reconciliation of deferred taxes in the balance sheet and deferred taxes in the income statement is as follows: 2004/05
2003/04 € million
Decrease / increase of deferred tax assets in the balance sheet of which due to change in companies consolidated, no effect on income of which other changes with no effect on income of which other changes affecting income Decrease in deferred tax liabilities in the balance sheet of which due to change in companies consolidated, no effect on income of which other changes with no effect on income of which other changes affecting income Deferred tax credit in the income statement
(5.2)
6.8
0.8 0.0
8.0 0.9
(6.0)
(2.1)
2.8
9.7
7.0 3.8
2.4 5.9
13.6
18.0
7.6
15.9
101
Consolidated financial statements
Reconciliation of earnings before income taxes to income tax expense: 2004/05
2003/04 D million
Earnings before taxes on income
457.4
393.6
37.9 %
37.9 %
Theoretical tax expense
173.2
149.1
Change in theoretical tax expense as a result of: - Different tax rate - Tax reduction for tax-free income - Tax increase for non-deductible expenses - Deferred tax income due to change in Austrian tax rate - Other
(32.2) (47.1) 6.0 (6.3) 6.3
(13.2) (51.5) 5.9 0.0 (4.0)
99.9
86.3
21.8 %
21.9 %
Theoretical tax rate
Taxes on income Effective tax rate
The theoretical income tax rate of 37.87 % is calculated by using the corporation tax rate of 25.0 % plus a solidarity surcharge of 5.5 % of the corporation tax charge, and municipal trade tax on income.
(29) Research and development expenses The main thrust of Südzucker Group’s research and development activities is in developing new products and product variances, optimising production processes and supporting marketing and business development activities. The range of work covers agricultural production, developments relating to sugar, sugar substitutes and their endproducts, through to applications in the food and non-food areas. Research and development work is carried out by some 250 staff at five group locations. Research and development expenses amounted to € 27.6 million (€ 26.0 million).
102
Other notes
(30) Earnings per share
Earnings for the year (excl. minority interest) in € million Number of shares Earnings per share in €
2004/05
2003/04
297.4
254.6
171,865,546
171,865,546
1.73
1.48
The calculation has been made in accordance with requirements set out in IAS 33 (Earnings per share). As in the previous year, the number of shares was reduced by those shares required by § 160 para. 1 Stock Corporation Law.
(31) Cash flow statement The cash flow statement, prepared in accordance with requirements set out in IAS 7 (Cash flow statements), shows the change in cash and cash equivalents of the Südzucker Group from the three areas of operating, investing and financing activities. Gross cash flow from operating activities in 2004/05 amounted to € 550.2 million (€ 522.2) million. Income taxes paid were € 104.2 million (€ 97.1 million). Interest paid was € 88.5 million (€ 83.3 million). Interest received totalled € 22.6 million (€ 32.0 million). Capital expenditures on property, plant and equipment (including intangible assets) were sharply higher at € 499.8 million (€ 306.6 million), as well as on financial assets (including acquisitions of consolidated subsidiaries), at € 590.0 million (€ 181.0 million), by means of which both the sugar segment and, in particular, the special product segment, were expanded. Dividends from associated companies and other investments amounted to € 7.6 million (€ 10.9 million). Profit distributions throughout the group totalled € 102.3 million (€ 127.2 million) and included € 87.4 million (€ 87.4 million) paid out to Südzucker AG’s shareholders and € 14.9 million (€ 39.8 million) dividend distributions to minority interest in consolidated subsidiaries. Repayments of financial liabilities of € 310.6 million in 2003/04 compare with an increase of € 414.7 million in financial liabilities in 2004/05.
103
Consolidated financial statements
(32) Segment reporting As set out in IAS 14, the segment information has been presented in accordance with internal reporting within the Südzucker Group, with operations divided into the sugar and special products segments. The sugar segment includes the core sugar business in Europe. The special products segment consists of the Palatinit, ORAFTI, starch and bioethanol divisions, together with the activities of the PortionPack, Surafti and Freiberger groups and AGRANA fruit group. Segment results are measured by their operating profit, i.e. profits before restructuring costs and special items, before amortisation of goodwill and interest and investment income and expense. Operating margin is calculated as the percentage of operating profit to revenues. Transactions between segments (revenues of € 122.4 million (€ 101.5 million)) are made at normal market conditions. In the schedule of segment assets and segment liabilities, financial assets, cash and securities, financial liabilities and tax liabilities, which cannot be attributed directly, are allocated to the segments. Capital employed reflects operating capital tied up in the group. It consists of non-current assets less financial assets, and working capital of the segment (inventories, trade and other receivables less trade and other payables, other current liabilities and current provisions and accrued liabilities). ROCE (Return on capital employed) measures operating profit as a percentage of operating capital. Capital expenditures on financial assets also include acquisitions of consolidated subsidiaries.
(33) Declaration of compliance per § 161 AktG The declaration of compliance relating to the German Corporate Governance Code per § 161 AktG was submitted by the executive board and supervisory board on 24 November 2004. It can be downloaded by shareholders at our homepage: http://www.suedzucker.de.
104
(34) Related parties A related party, as defined in IAS 24 (related party disclosures), is Süddeutsche Zuckerrübenverwertungs-Genossenschaft eG, Stuttgart (SZVG), which holds a majority of the shares in Südzucker AG by means of its own holding of Südzucker shares and the shares held by it on trust for its co-operative members. Items recorded on the accounts held for SZVG in 2004/05 were mainly cash received from dividends and business transactions. There is an agreement to pay interest on the balances on these accounts at normal market rates. The remuneration system for members of Südzucker AG’s executive board has fixed and variable, profit-related components. There are no long-term variable benefit components, such as share options or similar arrangements. The total compensation granted to members of the executive board by Südzucker AG for 2004/05 amounted to € 3.4 million. The variable component made up 41 % of their fixed remuneration, calculated based on the dividend to be approved by the annual general meeting. Compensation to members of the executive board granted by subsidiaries totalled € 1.9 million. Total compensation granted to members of Südzucker AG’s supervisory board for 2004/05 was € 1.5 million. A total of € 13.0 million has been provided in respect of pension obligations to former members of the executive board and supervisory board and their dependent relatives. Payments made during the year amounted to € 1.6 million.
105
Consolidated financial statements
(35) Supervisory board and executive board
c
Supervisory board Dr. Hans-Jörg Gebhard Chairman Eppingen Chairman of the Association of Süddeutscher Zuckerrübenanbauer e. V. 1
Board memberships SZVG Süddeutsche ZuckerrübenverwertungsGenossenschaft eG, Ochsenfurt (chairman) VK Mühlen AG, Hamburg
Dr. Christian Konrad Deputy chairman Vienna Chairman of the supervisory board of AGRANA Beteiligungs-AG, Vienna 2
Board memberships BayWa AG, Munich Siemens Österreich AG, Vienna, Austria SZVG Süddeutsche Zuckerrübenverwertungs-Genossenschaft eG, Ochsenfurt
Franz-Josef Möllenberg 4 Deputy chairman Rellingen Chairman of the Food and Catering Union
Heinz Christian Bär Karben – Burg Gräfenrode Vice president of the Deutsche Bauernverband e. V. Board memberships Landwirtschaftliche Rentenbank, Frankfurt/Main LBH Steuerberatungsgesellschaft mbH, Friedrichsdorf Vereinigte Hagelversicherung V VaG, Gießen
Gerlinde Baumgartner 4 Osterhofen Member of the works council of the Plattling works of Südzucker AG Mannheim/Ochsenfurt
Dr. Ulrich Brixner Dreieich Chairman of the executive board of DZ BANK AG 3
Board memberships Banco Cooperativo Español, Madrid, Spanien Kreditanstalt für Wiederaufbau, Frankfurt/Main Landwirtschaftliche Rentenbank, Frankfurt/Main Liquiditäts-Konsortialbank GmbH, Frankfurt/Main SZVG Süddeutsche ZuckerrübenverwertungsGenossenschaft eG, Ochsenfurt
Board memberships Kraft Foods Deutschland GmbH, Bremen (deputy chairman)
1
Board memberships other than within the Südzucker Group. Board memberships other than within the Südzucker Group and Raiffeisen-Holding Niederösterreich Group, Vienna. 3 Board memberships other than within the Südzucker Group and the DZ-Bank Group. 4 Employee representative. 2
106
Helmut Drescher 4
Paul Freitag
to 29 July 2004
† 9 April 2005
Wattenheim Former chairman of the works council of Südzucker AG Mannheim/Ochsenfurt
Oberickelsheim-Rodheim Chairman of the Association of Fränkischer Zuckerrübenbauer e. V.
Ludwig Eidmann
Erwin Hameseder
Groß-Umstadt Chairman of the Association of the Hessen-Nassauischen Zuckerrübenanbauer e. V.
Mühldorf, Österreich Managing director of Raiffeisen-Holding Niederösterreich-Wien reg. Gen.m.b.H.
Dr. Jochen Fenner
Board memberships VK Mühlen AG, Hamburg Flughafen Wien AG, Vienna, Austria
2
from 11 May 2005 Gelchsheim Chairman of the Association of Fränkischer Zuckerrübenbauer e.V.
Egon Fischer
4
from 29 July 2004 Offstein Deputy chairman of the works council of ZAFES Offstein Südzucker AG Mannheim/Ochsenfurt
Hans Hartl 4 Ergolding State area chairman of the Food and Catering Union in Bavaria Board memberships Südfleisch Holding AG, Munich
Klaus Kohler 4 Manfred Fischer 4 Feldheim Chairman of the works council of Südzucker AG Mannheim/Ochsenfurt
Bad Friedrichshall Chairman of the works council of the Offenau works Südzucker AG Mannheim/Ochsenfurt
107
Consolidated financial statements
Erhard Landes
Ronny Schreiber4
from 29 July 2004
from 29 July 2004
Donauwörth Chairman of the Association of bayerischer Zuckerrübenanbauer e.V.
Einhausen Chairman of the works council of the Mannheim head office Südzucker AG Mannheim/Ochsenfurt
Board memberships Raiffeisen-Volksbank Gersthofen-Meitingen eG, Gersthofen
Richard Schwaiger to 29 July 2004
Jörg Lindner
4
Malterdingen Divisional officer of the Food and Catering Union
Aiterhofen Honorary chairman of the Association of bayerischer Zuckerrübenanbauer e. V.
Klaus Viehöfer 4 to 29 July 2004
Ulrich Müller Illsitz Chairman of the Association of the Sächsisch-Thüringischer Zuckerrübenanbauer e. V. Board memberships Raiffeisen-Warengesellschaft mbH Gößnitz, Gößnitz SZVG Süddeutsche ZuckerrübenverwertungsGenossenschaft eG, Ochsenfurt (deputy chairman)
Erich Muhlack
Ernst Wechsler Westhofen Chairman of the Association of Hess.-Pfälzischen Zuckerrübenanbauer e.V.
4
to 29 July 2004
Roland Werner 4
Regensburg Former manager of the Plattling, Rain and Regensburg works of Südzucker AG Mannheim/Ochsenfurt
Saxdorf Chairman of the works council of the Brottewitz works Südzucker AG Mannheim/Ochsenfurt
Dr. Arnd Reinefeld4 from 29 July 2004 Offstein Manager of the Offstein and Groß-Gerau works of Südzucker AG Mannheim/Ochsenfurt Board memberships Landesverwaltungsrat TÜV Rheinland Berlin Brandenburg Pfalz e.V., Cologne
108
Grana Former member of the works council of the Zeitz works Südzucker AG Mannheim/Ochsenfurt
Executive board Dr. Theo Spettmann (Spokesman)
Mag. Johann Marihart
Ludwigshafen 1 Board memberships Berentzen-Gruppe AG, Haselünne (chairman) Gerling Vertrieb Firmen und Privat AG, Cologne (deputy chairman) Gerling Vertrieb Industrie AG, Cologne (deputy chairman) Karlsruher Versicherung AG, Karlsruhe
Limberg, Austria 1
Melin, Belgien
Board memberships BBG Bundesbeschaffungsges.m.b.H., Vienna, Austria Leipnik-Lundenburger Invest Beteiligungs AG, Vienna, Austria Österreichische Forschungsförderungsgesellschaft mbH, Vienna, Austria Österreichische Nationalbank, Vienna, Austria Ottakringer Brauerei AG, Vienna, Austria TÜV Österreich, Vienna, Austria (chairman) Universität für Bodenkultur, Vienna, Austria
Dr. Christoph Kirsch
Dr. Rudolf Müller
Weinheim/Bergstraße
Ochsenfurt
Albert Dardenne
1
Board memberships Baden-Württembergische Wertpapierbörse, Stuttgart
Thomas Kölbl
1
Board memberships K + S Aktiengesellschaft, Kassel Bayerische Landesanstalt für Landwirtschaft, Freising-Weihenstephan
from 1 June 2004 Mannheim
Frédéric Rostand Paris, France
Prof. Dr. Markwart Kunz Worms
1
Board memberships Société Bic S. A., Clichy, France
109
Consolidated financial statements
(36) Significant investments of the Südzucker Group The significant investments are listed by sub-group. Location
Country
Südzucker share
Indirect holding %
Südzucker AG Palatinit GmbH1 Südzucker Bioethanol GmbH1 Wolteritzer Agrar GmbH Agrar-und Umwelt AG Loberaue Cukier Malopolski S. A. Cukrownia Ropczyce S. A. Cukier Królewski Cukrownia Strzy˙zów S. A. Südzucker Moldova S. A. BGD Bodengesundheitsdienst Gesellschaft mbH1 REKO Erdenvertrieb GmbH1 Mönnich GmbH1 AGRANA Zucker, Stärke und Frucht Holding AG
Mannheim Zeitz Schkeuditz Zschortau Kazimierza Wielka Ropczyce Krakau Strzy˙zów Drochia
74.8 Poland Poland Poland Poland Moldova
99.4 94.4 51.6 100.0 81.2 67.6
Mannheim Regensburg Kassel Vienna
Austria
100.0 100.0 100.0 50.0
Raffinerie Tirlemontoise S. A. Hottlett Sugar Trading S. A. Candico S. A. ORAFTI Oreye S. A. Remy Industries NV PortionPack Belgium Suikers G. Lebbe S. A. PortionPack European Holding B.V. Atlanta Dethmers Beheer BV James Fleming & Co. Ltd. Sugarfayre Limited W. T. Mather Ltd. Groupe Nougat Chabert & Guillot Groupe Nougat Delavant
Brussels Berchem Merksem Oreye Wijgmaal Herentals Oostkamp Oud Beijerland Groningen Newbridge Ashington Ashton Montélimar Upier
Belgium 99.6 Belgium Belgium Belgium Belgium Belgium Belgium The Netherlands 33.00 The Netherlands Scotland England England France France
62.6 75.5 99.9 100.0 100.0 99.9 67.00 100.0 100.0 100.0 100.0 100.0 100.0
Saint Louis Sucre S. A. Saint Louis Sucre S.N.C. Saint Louis Sucre International
Paris Paris Paris
France France France
100.0 100.0
1
Exemption from publishing financial statements per § 264 para. 3 HGB. Majority of voting share. 3 Exemption per § 264b HGB. 2
110
100.0 100.0
85.1
Location
Country
Südzucker share
Indirect holding %
Sucrerie de Bourgone Sucrerie et Distillerie de Souppes-Ouvré Fils S. A. Eastern Sugar BV
Chalon-sur-Sâone France Paris France Deurne The Netherlands
50.0 44.5 49.5
Šląska Spółka Cukrowa Holding Cucrownia Baborów S. A. Cucrownia Cerekiew S. A. Cucrownia Chybie S. A. Cucrownia Jawor S. A. Cucrownia Łagiewniki S. A. Cucrownia Małoszyn S. A. Cucrownia Otmuchów S. A. Cucrownia Pastuchów S. A. Cucrownia Pustków S. A. Cucrownia Racibórz S. A. Cucrownia Strzelin S. A. Cucrownia Swidnika S. A. Cucrownia Wielun S. A. Cucrownia Wrocław S. A. Cucrownia Wróblin S. A.
Wrocław Baborów Cerekiew Chybie Jawor Łagiewniki Małoszyn Otmuchów Pastuchów Kobierzyce Racibórz Strzelin Pszenno Wielun Wroclaw Lewein Brzeski
Poland Poland Poland Poland Poland Poland Poland Poland Poland Poland Poland Poland Poland Poland Poland Poland
97.4 91.8 98.2 75.4 82.7 82.3 86.7 86.0 82.8 83.6 82.3 85.3 76.8 75.1 78.4 78.7
AGRANA Beteiligungs-Aktiengesellschaft 2 AGRANA Zucker GmbH Magyar Cukorgyártó és Forgalmazó Kft. Moravskoslezské Cukrovary A. S. S.C. Danubiana Roman S. A. S.C. Zaharul Romanesc S. A. Slovenské Cukrovany a.s. HUNGRANA Keményitö- és Isocukorgyártó SC A.G.F.D. Tandarei s.r.l. Vallø Saft A/S Steirische Agrarbeteiligungsgesellschaft m.b.H. Wink Service und Logistik GmbH Atys S.A.
Vienna Vienna Budapest Hrusovany Roman Buzau Rimavská Sobota Szabadegyhazar Tandarei Køge Raaba Bingen/Rhein Paris
Austria 37.8 Austria Hungary The Czech Republic Romania Romania Slovakia Hungary Romania Denmark Austria
Freiberger Holding GmbH1 Freiberger Lebensmittel GmbH & Co. Prod.-/Vertr. KG3 PrimAS Tiefkühlprodukte GmbH Stateside Foods Ltd.
Berlin Berlin Oberhofen Westhoughton
France
100.0 87.6 97.6 99.6 86.5 100.0 50.0 100.0 100.0 55.7 100.0 50.0
100.0 Austria Great Britain
100.0 100.0 100.0
111
Consolidated financial statements
(37) Events after the balance sheet date On 3 March 2005 AGRANA acquired a further 6 % of the shares in Atys Group, France and increased its investment in the world-wide fruit additives company to 56 %. Atys will be fully consolidated in 2005/06.
(38) Proposed appropriation of earnings It will be proposed to the annual general meeting that a dividend of D 0.55 per share be distributed and hence that the retained earnings of Südzucker AG Mannheim/ Ochsenfurt of D 96,185,083.52 be appropriated as follows:
Distribution of a dividend of H 0.55 per share on 174,787,946 ordinary shares
D 96,133,370.30
Earnings carried forward
D 51,713.22
Unappropriated earnings
H 96,185,083.52
The dividend will be paid on 29 July 2005. Mannheim, 13 May 2005 THE EXECUTIVE BOARD
Dr. Spettmann
Dardenne
Dr. Kirsch
Kölbl
Prof. Dr. Kunz
Marihart
Dr. Müller
Rostand
The financial statements of Südzucker AG, prepared in accordance with German accounting principles and upon which PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Frankfurt/Main, has issued an unqualified auditors’ report, will be published in the Federal Gazette and will be filed with the commercial register of the district court of Mannheim. It can be received from the company on request.
112
Auditors’ Report We have audited the consolidated financial state-
give a true and fair view of the net assets,
ments of Südzucker Aktiengesellschaft Mannheim/
financial position, results of operations and
Ochsenfurt, Mannheim, consisting of the balance
cash flows of the group for the business year
sheet, the income statement and the statements of
in accordance with IFRS.
changes in equity and cash flows as well as the notes to the financial statements for the business year
Our audit, which according to German audi-
from 1 March 2004 to 28 February 2005. The prepa-
ting regulations also extends to the group
ration and the content of the consolidated financial
management report prepared by the executive
statements according to the International Financial
board for the business year from 1 March
Reporting Standards of the IASB (IFRS) are the
2004 to 28 February 2005, has not led to any
responsibility of the executive board. Our responsibili-
reservations. In our opinion, on the whole the
ty is to express an opinion, based on our audit, whet-
group management report together with the
her the consolidated financial statements are in
other information of the consolidated financial
accordance with IFRS.
statements, provides a suitable understanding of the Group's position and suitably presents
We conducted our audit of the consolidated financial
the risks of future development. In addition,
statements in accordance with German auditing
we confirm that the consolidated financial
regulations and generally accepted standards for the
statements and the group management report
audit of financial statements promulgated by the
for the business year from 1 March 2004 to 28
Institut der Wirtschaftsprüfer in Deutschland (IDW)
February 2005 satisfy the conditions required
and additionally observed the International Standards
for the Company's exemption from its duty to
on Auditing (ISA). Those standards require that we
prepare consolidated financial statements and
plan and perform the audit to obtain reasonable
the group management report in accordance
assurance about whether the consolidated financial
with German accounting law.
statements are free of material misstatements. Knowledge of the business activities and the economic and legal environment of the Group and evaluations of possible misstatements are taken into account in the determination of audit procedures. The evidence supporting the amounts and disclosures in the consolidated financial statements are examined on a test
Frankfurt am Main, 13 May 2005
basis within the framework of the audit. The audit includes assessing the accounting principles used and
PwC Deutsche Revision
significant estimates made by the executive board,
Aktiengesellschaft
as well as evaluating the overall presentation of the
Wirtschaftsprüfungsgesellschaft
consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Frings
Wegener
In our opinion, the consolidated financial statements
Wirtschaftsprüfer
Wirtschaftsprüfer
113
Südzucker Aktiengesellschaft Mannheim/Ochsenfurt
Imprint
Corporate profile
Group Annual Report for 2004/05 Südzucker AG Mannheim/Ochsenfurt Maximilianstraße 10
1 March 2004 to 29 February 2005 The Südzucker Group
68165 Mannheim Telefon: +49 6 21 42 1-0 Telefax: +49 6 21 42 1-393
“ REFLECT AND ACT UPON THE TASKS FOR TODAY AND TOMORROW TO PROTECT THE INTERESTS AND LEGITIMATE CONCERNS OF OUR SHAREHOLDERS, CUSTOMERS, STAFF AND FUTURE GENERATIONS.”
http://www.suedzucker.de Investor Relations
[email protected]
Südzucker is an international organisation, using agricultural raw materials to produce safe and high-quality products, particularly foodstuffs for the food processing industry and consumers. In addition to the traditional sugar segment, in which Südzucker is the market leader in Europe, it has a dynamically growing special products segment, incorporating functional food (Palatinit/ORAFTI), starch, portion pack items, bakery additives, deep-frozen products (pizzas), fruit additives/fruit-juice concentrates and bioethanol. The group’s strategic objectives are to stay on a steady path of profitability whilst maintaining sound balance sheet and financial structures.
Telefon: +49 6 21 42 1-244 Telefax: +49 6 21 42 1-463 Wirtschaftspresse
[email protected] Telefon: +49 6 21 42 1-409 Telefax: +49 6 21 42 1-425
Südzucker thus concentrates on those activities in which it has a competitive advantage from its existing core competencies. The group’s significant strengths include a close connection to agriculture, knowhow in the sugar industry and innovative power supported by its internal research infrastructure. Those new business activities which have been set up in parallel with the sugar segment have an affinity to the core business, enabling business risks to be kept within reasonable limits.
Photographs: Wilhelm Dürr, Thomas Kauffelt, Hartmut Krimmer, Christel Pfau, Gerald Schilling, Südzucker
Layout and design: trio-group, Mannheim Printing and processing: Color Druck, Leimen © 2005
Using its CropEnergies brand, Südzucker started producing bioethanol and animal feed from wheat and sugar beet at a new and innovative plant in 2005. Four double-page spreads set out the benefits of Südzucker's bioethanol to investors, consumers, agriculture and the environment. We are committed to natural, sustainable growth.